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ANNUAL REPORT

2016
MINISTRY OF FINANCE
SRI LANKA

THIS REPORT IS PUBLISHED IN TERMS OF SECTION 13 OF
THE FISCAL MANAGEMENT (RESPONSIBILITY) ACT, NO. 03 OF 2003

MINISTRY OF
FINANCE
(AS AT 31st MARCH 2017)

Hon. Ravi Karunanayake, MP
Minister of Finance

Hon. Laxman Yapa Abeywardena, MP
State Minister of Finance

PRINCIPAL OFFICIALS
R.H.S. Samaratunga
Secretary, Ministry of Finance
Secretary to the Treasury

S.R. Attygalle
Ms. G.D.C. Ekanayake
A.R. Desapriya
Deputy Secretaries to the Treasury

R. Semasinghe
Additional Secretary
Ministry of Finance

HEADS OF
TREASURY DEPARTMENTS
(AS AT 31st MARCH 2017)

Department of National Budget Department of Public Finance
K.D.S. Ruwanchandra P. Algama
Director General Director General

Ms. G. K. Wimalaweera
Additional Director General P. Senthilnanthanan
Additional Director General
H.P. Jayananda
Additional Director General
Ms. J.C. Weligamage
L.H. Ramyasiri Additional Director General
Additional Director General

Department of Public Enterprises Department of Legal Affairs
K.D.N. Ranjith Asoka Kolitha Dharmawardane
Director General Senior Legal Advisor

Ms. D.C.W. Hapugoda
Additional Director General Department of Treasury Operations
Ms. D.M. Anula Harasgama
P.H.A.S. Wijeratne Director General
Additional Director General

Hemal Kasthuriarachchi C.J.K. Perera
Additional Director General Additional Director General

Department of Management Services
H.G. Sumanasinghe R.M.A. Rathnayake
Director General Additional Director General

Ms. B.M.S. Bandara
Additional Director General Department of State Accounts
S.G. Senaratne
M. Gopalaratnam Director General
Additional Director General
Department of Management Audit
Department of Fiscal Policy Ms. S.A.C. Kulathilake
A.K. Seneviratne Director General
Director General

Department of Trade and Investment Policy Ms. G.G. Pabasara
K.A. Vimalenthirajah Additional Director General
Director General

K.A.S.S.K. Perera Department of Information Technology
Additional Director General Management
S.H. Harischandra
Department of Development Finance Director General
A.M.P.M.B. Atapattu
Director General
Auditor
Comptroller General Office S.M.D.S.S. Rohitha
P.B.S.C. Nonis Assistant Auditor General
Comptroller General

HEADS OF DEPARTMENTS
UNDER THE PURVIEW OF
THE MINISTRY OF FINANCE
(AS AT 31st MARCH 2017)

Department of Inland Revenue
Ms. Kalyani Dahanayake
Commissioner General

Department of Customs
W.A.Chulananda Perera
Director General

Department of Excise
L.K.G. Gunawardena
Commissioner General

Department of Valuation
Ms. P.D.D.S. Muthukumarana
Chief Valuer

HEADS OF
STATUTORY BOARDS / OTHER
INSTITUTIONS UNDER THE PURVIEW OF THE
MINISTRY OF FINANCE
(AS AT 31st MARCH 2017)

Insurance Board of Sri Lanka National Lotteries Board
Ms. Indrani Sugathadasa Ms. Shyamila Perera
Chairperson Chairperson

Ms. Damayanthi Fernando Mr. Sunil Gunawardane
Director General General Manager

Development Lottery Board Lady Lochore Loan Fund
Romesh Jayawardane A.P. Kurumbalapitiya
Chairman Chairman

Saman Jayasinghe Winston Pathiraja
General Manager Managing Trustee

The Public Services Mutual Provident Academy of Financial Studies (Miloda)
Association Prof. D. Atapattu
Ajantha Galhena Chairman
President
Anura Lokuhetti
Sri Lanka Export Credit Insurance Co-CEO
Corporation
A.S.M. Misbah Sri Lanka Accounting & Auditing Standards
Chairman Monitoring Board
P.V.L. Nandasiri
Dilruk Ranasinghe Chairman
General Manager
Wasantha Geeganage
Tax Appeal Commission Director General
Justice H. Yapa
Chairman

CONTENTS
CHAPTER 01 Economic Perspectives 1
1.1 Overview 2
1.2 Key Issues and Challenges 4
1.3 Medium Term Budgetary Outlook 7

CHAPTER 02 World Economic Outlook 9
2.1 Overview 10
2.2 World Output 11
2.3 Inflation 13
2.4 Interest Rates 14
2.5 Unemployment 15
2.6 Fiscal Situation 15
2.7 Capital Flows and Financial Market Behavior 17
2.8 Currency Movements 18
2.9 World Trade 19
2.10 World Commodity Market 20
2.11 Summary

CHAPTER 03 Macroeconomic Review 25
3.1 Overview 26
3.2 Real Economy 27
3.3 Domestic Demand and Supply 39
3.4 Investment and Savings 40
3.5 External Sector Developments 40
3.6 Monetary Sector Developments 48
3.7 Inflation 50
3.8 Unemployment 50
3.9 Equity Market Developments 50

CHAPTER 04 Reforms 53
4.1 Overview 54
4.2 Reforms in the Investment promotion Environment 54

CONTENTS
CHAPTER 05 Fiscal Developments 65
5.1 Overview 66
5.2 Government Revenue 69
5.3 Government Expenditure 83
5.4 Financing Provincial Councils 85
5.5 Deficit Financing 86
5.6 Government Debt 87
5.7 Debt Service Payments 89

CHAPTER 06 Expenditure Review 91
6.1 Overview 92
6.2 Appropriation Act for 2016 92
6.3 Borrowing Limited 92
6.4 Amendments to the Appropriation Act, No. 16 of 2015 92
6.5 Supplementary Estimates 93
6.6 Funds withdrawn from the Contingency Fund 93
6.7 Special Law Warrants as Supplementary Allocation 93
6.8 Budgetary Performance in 2016 93
6.9 Advance Account Activities 95
6.10 Expenditure Management 95
6.11 Composition of Government Expenditure 96
6.12 Public Investment 98

CHAPTER 07 Public Investment Programme 2017-2020 111
7.1 Overview 112
7.2 Medium-Term Macroeconomic Perspectives 112
7.3 Development Projects Implemented by SOEs : Off-budget 115
7.4 Human Resources Development 115
7.5 Agriculture 117
7.6 Industry, Trade, Investment and Tourism 118
7.7 Infrastructure 118
7.8 Good Governance 120
7.9 Environmental Management 120
7.10 Social Protection 120
7.11 Regional Development 122

4 Ports 160 9.1 Overview 192 11.13 Plantation 176 CHAPTER 10 Cadre Management in the Public Sector 185 10.5 Domestic Debt Service Payments 128 8.8 State Banks 167 9. of Professions of Pubic Service Based on the Salary Codes 187 10.2 Public Financial Management Reforms 192 11.3 New Procurement Methodologies 194 11.2 Energy 154 9.3 Public Sector Cadre Based on the Profession 187 10.12 Marketing and Distribution 176 9.4 No.9 Insurance 171 9.1 Overview 150 9.3 Domestic Financing 125 8.2 Government Borrowing Programme – 2016 124 8.7 Construction 165 9.2 Population Growth vs the Growth of Public Sector Employees 186 10.5 Other Achievements 196 11.1 Overview 186 10.3 Water 158 9.5 Commuter Transportation 160 9.5 Creation of New Positions in 2016 189 CHAPTER 11 Public Finance Review-2016 191 11.4 Domestic Debt 126 8.6 Aviation 163 9.1 Overview 124 8.11 Livestock and Dairy 174 9.6 Foreign Financing 129 CHAPTER 09 Performance of State Owned Business Enterprises 149 9.10 Lotteries 173 9.6 Procurement Management 197 . CONTENTS CHAPTER 08 Financing of the Budget 123 8.4 Other Procurement Related Regulations 195 11.

April 2017 79 Box 10.3 Digital Transformation in the Government Sector 58 Box 4.4 Circulars Issued by the Ministry of Finance .January 2016 .2 SME Development 202 12. Inflation and Exchange Rate 370 Gross Domestic Product -Sectoral Composition (2010) Constant Table 4 371 Prices Table 5 Savings.1 Ease of Doing Businesses (EODB) Unit 55 Box 4. Investments and Selected External Sector Indicators 373 Table 6 Economic Classification of Government Fiscal Operations 374 Economic Classification of Government Fiscal Operations .3 Micro Financing 205 12.5 International Trade Agreements 63 Box 5.CONTENTS CHAPTER 12 Development Finance 201 12.6 Food Security 214 12.7 Implementing Budget Proposals 217 12.5 Assistance to the Smallholder Plantation Sector 211 12.As a % Table 7 375 of GDP Table 8 Economic Classification of Government Revenue 376 Economic Classification of Government Expenditure and Lending Table 9 378 Minus Repayments .8 Livestock Sector Development 218 12.2 Government Finance Statistics (GFS) 57 Box 4.1 Human Resources in the Public Sector 188 STATISTICAL APPENDIX 367 Table 1 Sri Lanka: Demographic and Related Trends 368 Table 2 Climate 369 Table 3 Gross Domestic Product (GDP).9 Support for the Development of Essential Crops 221 12.1 Overview 202 12.2016 61 Box 4.10 Special Incentives for Targeted Groups 223 CHAPTER 13 Financial Statements 225 BOX ARTICLES Box 4.4 Enhancing Agriculture Sector 207 12.1 Major Fiscal Measures .

CONTENTS Table 10 Funcitional Classification of Government Expenditure 379 Table 11 Composition of Government Debt 380 Table 12 Domestic Production of Selected Items 381 Table 13 Value of Exports 382 Table 14 Value of Imports 384 Table 15 Import Quantities of Selected Items 386 Table 16 Value of Food Imports 387 Table 17 Motor Vehicles 388 Table 18 Power Sector 389 Table 19 Roads 390 Table 20 Port Services 391 Table 21 Water Supply and Sewerage 392 Table 22 Communications 393 Table 23 Crude Oil and Petroleum Products 394 Table 24 Petroleum Products Tax Structure 395 Table 25 Health Services 396 Table 26 Education 397 Table 27 Access to Banking and Finance 398 Table 28 Labour Force and Unemployment 399 Table 29 Average Daily Wages and Strikes 400 Table 30 Poverty and Inequality 401 Table 31 Remittances and Departures for Foreign Employment 402 Table 32 Welfare Payments and Development Subsidies 403 Table 33 Tourism 405 Table 34 Livestock Sector 407 Table 35 Fisheries Sector 409 .

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6 ACCESS TO BANKING & Sectoral Growth (%) FINANCE Agriculture 7.580 Credit Cards Issued 90.8 11.3 9.9 82.5 -1.5 -4.315.6 196.6 56.2 Budget Deficit (Percent of GDP) -7.3 45.06 130.391 8.3 (Percent of GDP)) GDP at Market Prices (US$ Bn.6 56.6 Rs/SDR 172.935 19.417 18.833 1.981 3.4 Year End Total Expenditure and Net Lending 11.465 Worker's Remittances (US$ Mn.702 11.130 10.4 -5.369 -1.980 7.) -4.6 4.9 4.a.3 (a) 5.750 198.) 4.0 267.1 2.) 407.080 Budget Deficit (US$ Mn.0(a) 0.4 Expenditure (Rs.0 154.86 199.) 8.0(a) 6.744 3.625 3.6 Current Account Deficit (Present -1.045 Revenue (US$ Mn.7 273.) 13.3 4.398 (a) 2002 base year.029 Rs/US$ 110.5 69.503 9.242 Foreign Commercial Banks 1.009 -1.2 715.0 79.95 131. SRI LANKA AT A GLANCE 2010 .2 26.153 3.151 49 49 58 Current Account Balance (US$ Mn) -1075 -2.050 1.2 .0 776.8 18. 9.Bn) 145.1 Deflator (%) 2010=100 Inflation .387 DEBT (Rs.Bn) 31.154 10.8 58.5 Tax-Subsidier 10.0 11.702 1.6 75.208 3.505 10.785 11.686 Registered Finance Companies 37 48 46 46 Specialized Leasing Tax Revenue (Rs.8 Money Growth (M2b) (%) 15.839 71.4(a) 11.261 533.5 9.0 52.05 144.825 -8.356 1.489 176. 180 295 320 Overall Balance of Payment (US$ 921 1.363 Foreign (Percent of GDP ) 31.) 8.2 -0.032.489 -500 Mn) GOVERNMENT FINANCE Insurance Companies 19 21 28 29 Revenue ( Rs.9 7.7 44.528 -6.280 1.6 -3.1 53.073 Rs/SDR 170.7 74.626 11.214 473.287 -8.63 200.694 2.132 12.876 4.6 Revenue (Rs.56 135.6 11.018 -2.) 357 487 603 594 Rs/US$ 113.183 11.233 9.796 2.6 Agriculture 8.9 -1.4 (US$) (Percent of GDP) GDP (Growth %) 8.5 4.518 Domestic Commercial Banks 664 2.566 5.4 17.518 12.2 202.973 10.758 Annual Average Public Investment (Rs.06 149.0 43. .8 107.) Per Capita GDP at Market Prices Total Debt Service 2.3 56.915 Non Tax Revenue (US$ Mn) 819 1.018 6.2016 2010 2014 2015 2016 2010 2014 2015 2016 TOTAL GOVERNMENT GDP 4.0 -7.Mn) Current Expenditure (US$ Mn.334 EXCHANGE RATES (Rs.414 8.290 2.5 198.3 53.848 16.) 7.527 Total Expenditure and Net Lending 1.1 Per Capita GDP at Market Prices 310.8 4.431 2.145.6 31.763 Services 8.50 Public Investment (US$ .1 PROVINCIAL BUDGET Inflation .417 2.) 3.3 4.843 264.590 7.8 26.) 937 1. Bn) Total Government Debt GDP at Market Prices (Rs.Bn.8 4.925 3.5 5.8 31.Bn) MONETARY SECTOR STRUCTURE OF THE ECONOMY DEVELOPMENTS Share of GDP (%) Narrow Money (Rs.84 189.CCPI (%) (Annual 6.755 16.109 729 1.Bn) Current Expenditure (Rs.7 34.398 558.053 Credit Cards in Use 778.091 3.1 Broad Money (Rs.) 6.1 Services 54.195 1.116 7.8 13.323 13.8 53.6 33.Bn) 2.058 Tax Revenue (US$ Mn) 6.2 612.451 19.090 ATMs Tourism (US$ Mn.3 -2.1 3.293 10.4 201.406 Industry 26.9 7.GDP Implicit Price 7.Bn.1 77.2 3.) 576 2.046 3.0 -6.) -3.3 Domestic (Percent of GDP ) 40.727 4.464 21 8 7 7 Companies Non -Tax Revenue (Rs.045 3.055 1.80 (US$.323 1.Bn) 817 1.045 9.939 -4.7 Branches 1.9(a) 7.942 Specialized Banks n.Bn) 36.4 3 6.0(a) 7.835 14.Bn) 92 145 99 222 Student Savings Units 2.102 -4.400 Trade Balance (US$ Mn.4 190.Bn.3 5.6 Central Government Transfers Labour Force Participation Rate (%) 48.5 213.430 -9.635 2.9 3.414 9.434 4.3 0.Bn) 725 1.3 81.4 4.2 Domestic Commercial Banks 11 13 13 13 Industry 8.455 1.5 (Rs.4 of GDP) Primary Deficit (Percent of GDP) -1.2 Foreign Commercial Banks 11 12 12 12 Branches 46 221 220 221 EXTERNAL TRADE Specialized Banks 9 8 7 7 Exports (US$ Mn.Bn.310 Branches 500 397 624 630 Imports (US$ Mn.1 59.7 Tax Revenue (Rs.5 76.406 3.963 3.3 Average) Unemployment (%) 4.94 145.) 56.4 GNP (Growth %) 7.7 -0.544 1.2 (Rs.6 66.

624 Fresh Milk (Mn Ltr.042 1.9 1.501 3.630 Tea (Mn Kg ) 331 338 329 293 Buses 84. SRI LANKA AT A GLANCE 2010 .7 89.865 47. Point of Pedro and Karraynagar Ports.380 Motor Cycles 221.0 98.000 17.075 4.441 329.760 4.611 86.4 Postal Computer Literacy Rate (%) 20.017 349.383 4.185 5.584 2.063 4.298 59.9 75.514 Ports Motor Vehicles for Transport of 20.0 98.9 16 15.059.998 108.998 Goods Total Container Traffic ( '000 Passenger Van and Buses 2.870 3.205 3.0 91.495 1.938 5% Duty 415 .042 2010 2014 2015 2016 2010 2014 2015 2016 SOCIAL DEVELOPMENT ACCESS TO BASIC INFRASTRUCTURE Mid Year Growth of Population 1.137 4.327 .0 0.240 74.781 3.516 1. 188 10% Duty .339 353.9 0.435 Handling ('000 TEUs) Motor Cars 410.5 99.3 93.115.000 Live Births) Crude Birth Rate (Per 1.362 343.8(b)(c) n.474 Paddy ('000 MT) 4.5% Duty .5(d) Public Post Offices 4.76 Private Post Offices 606 629 629 629 and over) MOTOR VEHICLE IMPORTS Roads Motor Cars 26.Raw Materials 3.674 Three-Wheelers 529.381 4.724 Tractors 18. 9 15% Duty 1.35 11.Tractors 276.3 (%) Life Expectancy at Birth (2013.457 1.911 349.457 57.272 117.301 3.Tailors 46. 5 Specific Food Items (84) & Local Industries 67 65 Specific 60 84 Specific & Advelorum 186 255 Specific & Advelorum 193 184 Total 6.041 44.426 63.2 6.988.309 30% Duty 1.601 25% Duty .233 13.617 5. n.410 Duty free items .612 3.699.012 117.8 93.487 6.5 94.6 16.228 325.519 Transshipment Containers Total Vehicle Stock 3.a.545 365.6 92.0 40. 25 25% Duty . 81. 5% Duty .063 4. Myliddy.888 Coconut ( Mn Nuts) 2.207 82.832 319.550 persons) Cellular Phones (No.6 92.987 Production of Agriculture Sector Motor Cycles 2. 30% Duty Luxury Goods & Motor Vehicles 1.059 4.419 104.093 12.50 11.534 2.3 24.781 4.091 4.001 391.a.769 341.965 7.011 Motor Vehicles for Transport of 296.123 24.100.3 6.601 2.502 717. n.19 Three-Wheelers 92. Access to Pipe-borne Water (% 74.7 89.0 44.359.246 22.866 44.3 45.000 Access to Safe Drinking Water 9.9 47.2 Fixed Access Services ( '000) 3.a. of Literacy Rate . 1.997 333.a.(%) (e) 17.385 26.874 672.5 93. 125% Duty Liquor 5 5 125% Duty .324 1.104 Rubber (Mn Kg ) 153 99 89 79 Dual Purpose Vehicles 209.430 75% Duty 4 3 75% Duty Tobacco 3 3 85% Duty .000 6.) 248 333 374 384 Land Vehicles .6(d) 27.920 services) ( '000) Male 92.856 4.819 4.655 26.908 5.500 14.80 11.735 TEUs) Other 277 399 510 322 Total Cargo Handled ('000 MT) (f) 61.7 2015) of Population) Infant Mortality Rate (Per 1.74 1.78 0.9 8.2016 2010 2014 2015 2016 Duty free items 2.279 101.766 3.420 Goods Land Vehicles .4 92. .1 74.2014.922 3.679 2.2 6.1 Female 90.3 74.2(b)(c) n.228 Subscribers )( '000) Internet and email Subscribers Average 91.2014. 1 85% Duty Cigarettes 1 1 100% Duty 5 .920 Road Density (Km2) 1.298 4.280 97.218 32.853 132.8(d) 26.926 Total 6.221 Vessels Arrived (f) 4.2 94.832 2.431 77.1 Electricity to Households (%) 88.543 929.088 Fish ('000 MT) 385 535 520 531 (b) Provisional (c) Figure for 2013 (d) During first 06 months (e) Based on Quarterly Labour Force Survey.692 334.7 Live Births) (% of Population) Maternal Mortality Rate (Per 22 26.450 15% Duty Intermediate Goods 1.2 (Including mobile internet 480 3.78 1.942 Total Road Length (Km) 114.6 Telecommunications persons) Crude Death Rate (Per 1.062 Dependency Ratio (%) (65 years 9. 2 7.2015 (f) Excluding KKS.050 3.687 2.967 4.282 566.0 89. DCS -2013.745 40.967 3. 100.

938 2.089 3.492 21.7 6.062 4. Capitalization (%) Intake (h)(i) *Government ** Including special Schools teachers and Excluding International Schools teachers (g) Women Population estimates were calculated based on final results of the Census of Population and Housing 2012 (h) Based on Household Income and Expenditure Survey (2012/13).837 20.a.940 4.37 0.895 6.987 2.162 6.129 4.189 8.127 Hydro Power 175 287 307 342 CAPITAL MARKET Thermal Power .a.729 Tamil 2 3 2 2 (PHI) Attendants 8.9 Coal 300 900 900 900 Labour Force (%) Women in the Public Service 445 571 529 498 Other 3 3 3 3 ('000) Unemployed Women (%) 7.Fuel 842 671 511 611 Market Capitalization (Rs.) 112 226 223 230 Public Hospitals 568 601 610 598 Sinhala 66 124 131 136 Private Hospitals 172 210 217 225 Tamil 18 42 39 38 Central Dispensaries 476 484 475 487 English 28 32 43 44 Beds* 69.6 6.504 1.a.a.689 1. 1985=100 S&P SL 20 Index (2004 =1.891 WOMEN PARTICIPATION Hydro Power 1.021 8.2 (h)(i) n.090 6.208 2.999 235.108 966 1.458 Government 6 5 5 5 Nurses* 27.357 1.850 4.018 Public Sector 2.a.105 2.Mn) All Share Price Index (ASPI) 6. 1 1 Midwives 8.123 10.884 2.7 (h)(i) n.499 Sinhala 2 2 2 2 Public Health Inspectors 1.999 Sinhala 14 12 12 12 Private Tamil 5 5 5 5 Schools 98 103 104 105 English 2 1 1 1 Students ('000) 117 131 136 136 Private 31 32 36 34 Teachers 5.626 3.215 8.575 3.855 8.636 7.40 (h)(i) n.867 1.276 9.932 3.415 1.655 236.6 7. DCS (i) Figure for 2013 (j) 15 years and over population .2 19.a.075** 6.7 18. n.503 Total 3.493 7.000) 7.994 6.9 6.6 36. Market Price Earnings Ratio.6 7.842 Private 14 13 14 19 Sinhala 7 8 9 13 EDUCATION Tamil 2 2 2 3 Government English 5 5 3 3 Schools 9. SRI LANKA AT A GLANCE 2010 .331 21.2 35. 28 10 12 ELECTRONIC MEDIA PROFESSIONALS Television Services 20 18 19 24 Doctors* 16.088 8.776 6.444 1.a.501 76.384 Women Population ('000) (g)(j) 8.872** Sinhala n.164 9.0 35.0 12.a. 20 22 20 Pirivenas Tamil n.118 n.4 0.0 1. Bn) 2.964 32.918 76.144 10.504 Employed Women ('000) 2.111 25.a. 9 10 10 Students ('000) 62 63 65 66 INSTALLED CAPACITY (MW) Teachers 6.8 11.143 Government 21 18 18 18 Teachers 212.377 1. n.824 2.a.396 1.078 4.059 1.2016 2010 2014 2015 2016 2010 2014 2015 2016 ACCESS TO BASIC NEEDS PRINT MEDIA HEALTH Newspapers (No.377 1.745 Other 42 150 149 174 Average Daily Turnover 2.829 Bilingual n.2 2.689 8. n.a.0 8.457 229.060 737 POVERTY (2009/2010 & 2012/2013) (Rs. Gini Coefficient of Per Capita 25.162 Radio Services 52 50 54 52 Students ('000) 3.245 8.798 Fuel 548 544 604 604 Women Participation in the 31.210 3.494 31.228 Poverty Head Count Index (%) 8.127 2.664 1.a.272 32.384 Thermal Power 848 1.496 Poverty Gap Index (%) 1. End of the Year (%) Expenditure Turnover to Market Average Daily kilo Calorie 2.268 English 2 .267 3.0 Private Sector 1. n.781 76.299 6.685 10. 3 4 4 Schools 719 747 749 754 English n.

5. 40 40 Length below 60mm 3.000) Liquor & Tobacco .0 Mn.Wheelers Exports 0 0 0 0 Petrol 4 95-105 105 105 Nation Building Tax (NBT) (%) 2 2 2 2 Diesel 14 105 105 105 Ports and Airports Development 5 5 5 7.25 0.850 (Other than Internet) Arrack Country Made Foreign Liquor Share Transaction Levy (%) .000 20 20 Next Rs. 500.000 Tax Free Allowances Rs. Per Proof Liter) Telecommunications Levy (%) Coconut Processed/Molasses .2016 GOVERNMENT TAX RATE (%) 2010 2014 2015 2016 Tax Free Allowances Rs.5 Levy (%) Liquor Duty Structure (Rs.610 23.000 8 8 Next Rs.000 Rs. . Per 1.05-1 0.375 Export Income 12 12 12 12 Length 67-72mm 9.000 25.000 20 Next Rs.3 0.973 12.100 27.000 10 Next Rs. 1.120 other than toddy Finished and Luxury Goods 30 25 30 30 Imported Malt Liquor . 25 25 25 863 1. 0. 500. . 50 Imported Wine . 100 Any other imported Liquor .240 34.500 Economic Service Charge (ESC) Length 72-84mm 12. 500. SRI LANKA AT A GLANCE 2010 .5 Length Exceeding 84mm 15.108 21.000 25 Next Rs.750 30.000.003 1.300.975 11.465 6.000 Tax on Taxable income Tax on Taxable income Tax on Taxable income Next Rs.3 1.000 20 Next Rs. 500.25 0. 500.000 12 Next Rs. . 500. .675 17. 500.000.000 8 Next Rs.000 4 Next Rs.811 14.000 16 16 Next Rs. 500.000 5 First Rs. 500. 500. 200 .500 ESC Rate (%) 0.595 1.660 20.120 1.975 6.860 2.030 (Beer) Malt Liquor (Beer) above 5% in CUSTOMS DUTY (%) 96 185 245 315 Strength Malt Liquor (Beer) less than 5% Inputs / Raw Material 0-5 0-7. .5 0 0 80 150 190 190 in Strength Liquor made from any cereal Intermediate Goods 5 or 15 15 15 15 718 1. 1. 500. 12 12 12 12 Length 60-67mm 6.000 30 Balance 24 Balance 24 24 Balance 35 As at end As at end 2010 2014 2015 2016 2010 2014 2015 2016 Corporate Tax (%) Excise Duty Standard Rate 28 28 28 28 Cigarettes (Rs. 500.3 0.660 14.000 Tax Free Allowances Rs. 400. . 500.485 1.000 12 12 Next Rs.675 Taxable Income less than Rs. 400. . .120 1.000 4 4 Next Rs.000 15 Next Rs.000 16 Next Rs.700 1.250 (Any ESC Paid is Deductible from any Income Tax/ Corporate Tax Motor Vehicles (%) Payable) Value Added Tax (VAT) (%) Motor Vehicles 23-138 20-300 50-300 30-300 Standard Rate 12 12 11 15 Three .675 12. 500. 400.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 01 | Economic Perspectives Economic Perspectives 01 1 .

2 demand due to subdued global economic (2013) Births recovery.30 percent. marked by a lower fiscal 2 . (End of Motor Cycles 349. Consequently.5 23.7 89. (b) reversing of the decades-long adjustment.942 the Year) percent in 2016 compared to 4.7 Internet and Email percent in real terms. (c) enhanced revenue mobilization part of 2016.7 percent and 6. domestic 2016 compared to the approved limit for the money market interest rates rose. Services) agriculture sector contracted by 4. For revenue mobilization was further supported by instance.059 44.2 Mobile Internet Persons growth momentum of the economy.2 percent Number of Motor No. Investment demand grew by 18. the yield rate of 364-day Treasury prudent expenditure management. Access to Safe Drinking % of 89.907 493. particularly on social beginning of 2016.0 percent measured by both the Colombo No.1 Overview Item Unit 2015 2016 Sri Lankan economy grew by 4.17 percent by end of 2016 in an improved adequacy and effectiveness of compared to 7. (End of Meanwhile.0 15. (End of 109.000 domestic investment demand despite the drag Crude Death Rate 6.3 Population percent in real terms compared to 1.3 124 Persons by improving macroeconomic fundamentals. annual average inflation remained Three-Wheelers the Year) 132. year-on-year basis.4 percent. amidst Sources: Central Bank of Sri Lanka and Department of Census and challenging domestic environment mainly due Statistics to weather related factors and external economic developments such as rising international commodity price levels.328 due to supply side disruptions during the year. resulting in year. monthly The year 2016 witnessed a significant NCPI inflation.2 Chapter 01 | Economic Perspectives Persons on the economy from a higher negative external Infant Mortality Rate Per 1.4 percent in Crude Birth Rate Per 1.9 47. revenue and expenditure allowed a credible fiscal consolidation. MINISTRY OF FINANCE. Nonetheless.7 Demand management policies implemented by Water Population the government and Central Bank resulted in a Telephone Density slowing of consumption demand. domestic credit growth and hence the of heavy debt servicing burden on government money growth remained elevated during most cash-flows. while some revisions to domestic administration improved government revenue taxes may also have resulted in a one-off price substantially. Nonetheless.7 sector respectively grew by 4. (d) extra fiscal space created by improved a higher yield of government securities.7 percent in 2015. chiefly supported by large investment Water Population 45. as necessitated Cellular Phones Per 100 116. (During 668.1 | Selected Socio-Economic Indicators 1. resulting bills increased to 10.7 projects of the government and private sector. and (e) prudent management of percent during the year.523 329.1 Access to Electricity % of 98. reflecting major highlights include the following : (a) the mainly transient impact of weather-related reforms introduced to the tax regime and tax disruptions.724 low at 4. marking an increase of 39 protection.000 Live 8. SRI LANKA | ANNUAL REPORT 2016 Table 1.2 percent Access to Pipe-borne % of in 2015.920 Consumer Price Index (CCPI) and National the Year) Consumer Price Index (NCPI) in 2016.779 47. the unemployment rate declined to 4. the services sector and industry Access Services Persons 128.000 16. ranged improvement on the fiscal front.4 Motor Cars No.6 Persons 2016 underpinned by a noticeable uptick in Per 1. No.7 135. Total including Fixed Per 100 Meanwhile. Vehicles Registered the Year) With improved activity in industry and services Vehicle Imports sectors. reported at the government spending.2 8. reflecting the underlying Subscribers (Including Per 100 19. warranting a tightening of demand resulted in substantially lower borrowing in management policies.3 6.5 99. Some between -0. Despite relatively low inflation on revenue decline eased the burgeoning pressure average.2 percent and 6.

6 -5.7 4.8 17.935 19. Meanwhile. while capital expenditure and net lending GDP.9 -13.5 National Savings (% GDP) 28.6 Budget Surplus(+)/ Deficit (-) (% GDP) -7.090 Exports (% GDP) 15. expenditure.985 6.407 7.980 7.310 Imports US $ Mn 13. SRI LANKA | ANNUAL REPORT 2016 deficit and significantly lower primary balance.9 3.5 23.3 14. down from 15. Improvements growth was curtailed in 2016 by rationalizing in public finance management as reflected in recurrent expenditure and prioritizing capital revenue and expenditure management policies.3 4.0 14.9 52.2 percent of 2015. 3 . recorded a marginal growth grow by 15.2 13.8 6.491 2.4 5.6 -5.3 14.358 2.2 12.6 5.6 79. Accordingly.9 Total Revenue and Grants (% GDP) 13. Department of Fiscal Policy.MINISTRY OF FINANCE.5 26.145 5.0 19.1 33. 14.0 13.019 Annual Average Exchange Rate (Rs/US$) 1. government expenditure moderated to 4.018 6.0 -6.626 10.3 29.2 32.2 14.3 14.431 2.5 -2. recurrent Chapter 01 | Economic Perspectives the high-base in the previous year.2 -1.8 (% of Labour Unemployment Rate 4.242 Earnings from Tourism US $ Mn 576 830 1. Bn 1.4 Force) Investment (% GDP) 30.7 4.7 -7.417 -7.039 1.6 14.0 11.9 0. In absolute expenditure as a percentage of GDP marked at terms.8 4.3 33.843 3. Annual Average 6.758 3.825 -9.4 4.4 31.0 8.7 31.9 Sources: Central Bank of Sri Lanka.5 14.9 Current Account Surplus(+)/ Deficit (-) (% GDP) -1.495 8.4 12.1 52.1 12.3 Exports US $ Mn 8.2 | Selected Macroeconomic Indicators Item Unit 2010 2011 2012 2013 2014 2015 2016 GDP (Real) Growth Rate (% Change) 8.609 3.9 34.6 13.1 68.3 28.287 -8. reduced the overall budget deficit to 5.4 Government Debt (% GDP) 71. which grew by 28.304 6.3 0.8 18.7 53.4 17.351 3.976 498.0 11.8 4.6 12.609 -8.0 13.269 19.4 percent Table 1.130 10.4 -10.208 7.116 5.2 24.8 percent in 2016.544 427.9 17.8 53.4 4.3 -0.7 -1.7 percent in 2015.686 bn in 2016.5 23.205 Gross Credit to Private Sector (% Change) 24.744 3.1 17.4 -5.2 -2.2 -10.5 8.125 3.9 percent of GDP.400 Trade Balance US $ Mn -4.3 3.4 Foreign Remittances US $ Mn 4.1 21.9 -7.4 -11.546 10.7 2006/2007=100) Labour Force Participation Rate % 48.6 Per Capita GDP at Market Prices Rs.0 24.7 13.828 522.7 Recurrent Expenditure (% GDP) 14.7 70.715 2.8 71.2 53.9 11.2 4.5 -14.534 2.710 -9.3 o/w Total Revenue (% GDP) 12.003 19.7 Imports (% GDP) 23.2 Current Account Balance (In BOP) (% GDP) -1.0 4.8 15.4 -2.9 Trade Balance (% GDP) -8.394 11.1 -5.4 Gross Credit to Private Sector Rs.363 Per Capita GDP at Market Prices US $ 2.8 26.6 6.0 4.9 -0.388 -9.9 4.5 13.518 Gross Official Reserves US $ Mn 7.450 4.8 3.5 -1.9 percent in nominal terms despite of 3.4 9.3 77.4 GDP Deflator (% Change) 7. 310.8 -3.9 3.355 558.0 -6.0 28.3 percent in 2016.5 53.6 16.4 39.835 Colombo Consumers Price Index (CCPI.538 465.3 20.774 10.0 12.3 -13.821 3.2 6.2 16. Department of Census and Statistics.1 -4.559 9.5 percent in 1. government revenue amounted to Rs.6 2.451 20. which was 14.3 -2.190 18. continued to interest payments.4 33.1 3.2 Expenditure and Net Lending (% GDP) 20.6 7.5 17.7 7.9 29.197 6.981 3.4 17.8 -10.6 percent in 2015 due mainly to newly implemented welfare improving Accordingly.2 2.0 28.7 13. government revenue which measures and significant increase in domestic increased by 21.8 19.417 18.8 Capital and net Lending (% GDP) 5.6 (% Change) Money Supply (M 2b) (% Change) 15.8 25.8 -0. Particularly. Note: Rebased GDP estimates (base year 2010) of the Department of Census and Statistics have been used from 2010 onwards.9 4.9 -0.3 5.2 -5.106 7.006 2.8 10.749 7.6 12. recurrent expenditure.6 71.214 345.9 19.

due emphasis in 2016. Sri Lanka’s external sector lowest primary deficit for decades. recovery in advanced economies and diverse particularly. of vessel arrivals to 4. fiscal policy now dollar terms to US dollars 3.9 percent to 23. while internet usage undue pressure on cash flow management.8 percent in 2016.6 percent of GDP in 2015. owing to a modest rate was subject to depreciation pressure during nominal GDP growth and depreciation of the most part of 2016.4 percent to 135. rupee against the US dollar.835 from US dollars aims at. SRI LANKA | ANNUAL REPORT 2016 of GDP in 2016 from 7. In the backdrop of such challenging global improved to 0. Access to pipe government debt. With the notable improvement in the in 2015. meeting the infrastructure demand performance of emerging market economies. Performance in Port services investment would spread over time. A major structural deficiency maintained the improved Human Development that Sri Lanka experienced in the recent decades Index (2015) ranked at 73 out of 188 countries was the continuous decline in government while life expectancy at birth improved to revenue. Telephone penetration including expenditure mismatch. showing a of payments and a drag on the build-up of major shift compared to recent years. exchange GDP rose at the end of 2016. Such strategy would mixed with weaker-than-expected economic facilitate the envisaged growth momentum. thus rendering support cellular phones increased by 5.. international reserves. thereby decelerating the build-up of in 2016 from 562 kWh in 2015. per capita GDP at market policy attention and appropriate corrective prices increased to Rs.843 in 2015 due to depreciation of the rupee. with the participation of the Global economic developments in 2016 were private sector as well. A major focus area would be to utility services in the country.7 percent in 2016 from to be prioritized in a manner in which return for 45.e.to long-term.3 percent of households. many advanced economies output was below Importantly.2 percent of GDP. resulting in a deficit in balance Rs. flows.355 measures. In 2016. 1. 558.363 from Rs. 522. As liquidity in the foreign outstanding government debt as a percentage of exchange market remained constrained. marking the market conditions. i. On the increased by 18. short- improved in 2016 recording a 5 percent growth term as well as over the medium.2 per 1000 persons capital expenditure prioritization.2 Key Issues and Challenges Sri Lanka marked an overall improvement in socio-economic indicators in 2016. addressing other structural deficiencies Reflecting the improvements in the provision of in the economy. Nonetheless. would need to be placed on the development of infrastructure. MINISTRY OF FINANCE.7 for government debt servicing without creating per 1000 persons in 2016.9 percent in 2015. Meanwhile. so that 99.998 while increasing the Such properly phased out gestation periods total cargo handling by 11 percent compared to of public expenditure would avoid a revenue- previous year. reflecting the showed modest performance as characterized Chapter 01 | Economic Perspectives impact of recently introduced fiscal consolidation by widened trade and current account deficits efforts. The Labour Fiscal Policy Force Participation Rate (LFPR) continued to remain at elevated level of 53. 334 bn. while per capita the need for excessive borrowing would be electricity consumption increased to 603 kWh contained. primary budget deficit which strips potential and unemployment remained relatively interest payments from the overall budget deficit higher. Ceylon Electricity enhance the fiscal space required for government Board expanded its electrification coverage to expenditure on productive sectors. In for utility services due to increasing pace of 4 . Fiscal policy of the government is driven by the with the highest participation rate was from the intent of ensuring fiscal sustainability and macro- age group of 40-44 years. Public investments would need born water increased to 47. while further strengthening revenue 3. even if it decreased marginally in US government revenue front. about 3 percent of GDP. which necessitated an immediate 75 years. Meanwhile. government revenue net of and subdued foreign exchange inflows to the total debt service payments recorded an excess of financial account. Sri Lanka economic stability.

best practices. required measures need to be taken. Timely tax administration which is considered to be a implementation of revenue reforms aimed at major impediment to enhancing tax compliance. which is the core component of the government revenue in 2016. Inland Revenue Act would need to enhance tax Further. Sustaining the momentum of revenue Tax Administration mobilization would be a major policy priority. commenced operations in 2016 would need to be Further. building on the improved performance of Various measures have been initiated to improve government revenue mobilization. Government the Fiscal Management Efficiency Project needs envisages a gradual increase in the relative share to enhance coverage across all sectors. such as elimination of CESS Government Revenue levies etc.0 and departments with the view to % of GDP 14. simplification of tax conditions would be imperative in the efforts system would be a prime focus to maintain to eradicate poverty and ensure environmental competitiveness. while adhering to international sustainability. modernization and simplification of the manage allocations efficiently and effectively. The monitoring and review processes The tax policy framework as announced in need to be carried out periodically with the the Budget 2017 would need to continue over emphasis on the financial and physical progress the medium-term.MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 urbanization and real property development. and system enhancements would be a major economic issues such as ageing population and priority to enhance efficiency and effectiveness Chapter 01 | Economic Perspectives increasing vulnerabilities to incidence of natural of indirect taxation. thereby of direct taxation.0 11.0 13. Meanwhile. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tax Revenue Total Revenue National Budget process needs to continuously demand justifications for each and every item in Tax Policy the respective budgets before requesting for fund allocations. the required fiscal space to improve the living Meanwhile. thereby creating certainty in the line ministries and agencies.0 of all expenditure needs of line ministries 15. 5 . management function of the government. On the corporate tax quarterly expenditure commitments would help policy. Chart 1. In this context.0 Measures need to continue on the evaluation 16. Introduction of government’s tax policy.1 | Government Revenue Expenditure and Net Lending 17.0 rationalizing any unproductive expenditure 12. by improving fairness of the automating the entire process of public finance tax system of the country. rationalizing Information System (RAMIS) at the Inland the tax exemptions and concessions and Revenue Department (IRD) and Single Window strengthening the tax administration would be System at the Sri Lanka Customs (SLC) which essential for sustained revenue mobilization. the government has recognized the fully operationalized to gain intended maximum importance of enhancing non tax revenue as benefits. streamlining the tax system including the tax Revenue Administration Management legislation. Such improvements in socio-economic trade related tax policy.0 and eliminating excessive administrative 10. as it contributed over 13 percent of General Treasury. the Integrated Treasury a necessary condition for revenue enhancing Management Information system (ITMIS) at the efforts. simplification of indirect tax structure conditions of the society while addressing socio. fiscal policy would contribute to ensuring compliance and revenue from corporate sector. broadening the tax base. Implementation of the zero budgeting approach into the formulation of 2016 Pro.0 overheads. precluding any new taxes of development activities implemented by the being imposed. With regard to international disasters.

including granting over the medium-term. Some of such reforms as investor confidence and favorable conditions in incorporated to the planned Public Financial international financial markets. on the basis of operational lease method in the government sector institutions would need to Reforms of State Owned Enterprises ensure that proper management in expenditure Chapter 01 | Economic Perspectives is maintained. SRI LANKA | ANNUAL REPORT 2016 Implementation of expenditure management management of public assets while ensuring measures such as cost effective usage of vehicles good governance. Resource allocation would need to be Finance would need to ensure the creation of the primarily based on the identified priority projects platform to key SOBEs to operate in a commercially over the short to medium term. Therefore. Accordingly. across all major sector ensure the availability of adequate funding for of the economy thereby facilitating economic the government’s financing needs at the lowest interconnectedness and mutual benefits among possible cost with the minimum rollover risk and sectors. requirements for deficit financing the need for Public Private Partnership (PPP) in would tend to ease. accumulation. utilization of resources while aiming at better To avoid such excessive build-up of foreign debt 6 . production. Government viable manner. gross foreign methodologies as per the directives of Cabinet of borrowings would need to increase substantially Ministers need to be aligned with the optimum to finance foreign debt servicing requirements. Meanwhile. proposed measures is an essential element in sustaining a higher level to bring subsidiary companies coming under the of economic growth and rising living standards of State Owned Business Enterprises (SOBEs) under people. there exists a marked more funds need to be mobilized to cater the increase in foreign debt servicing during 2019- growing demand for infrastructure and utility 2022 period mainly due to maturing international services. Public Investment capital formation and employment creation in The importance of improving public investment the economy. Hence the public investment programme the purview of Auditor General would ensure needs to be directed towards strategically enhancement in the performance. A Government Debt special emphasis would be needed improving investment on infrastructure in a coordinated and Public debt management strategy would need to well-distributed manner. State Owned Enterprises would need to continuously play a strategic role in generation of more commercial activities. Moreover. budgetary of long-term leases of government’s non-strategic preparation would need to mobilize adequate assets to private sector. The government improve the governance and service delivery would continue to rely on low cost external to the public while increasing transparency borrowings taking advantage of improved and accountability. Appropriate measures need to has identified education and health as major continue on strengthening the financial position thrust areas for socio-economic development of State Owned Enterprises. MINISTRY OF FINANCE. The introduction of new procurement sovereign bonds. thereby containing debt infrastructure development and investment. Nonetheless. the least impact on debt accumulation. As government identified medium term. Entering into the Extended Fund facility (EFF) programme with the International Monetary Fund would Public Financial Management need to support the implementation of necessary The government would need to continue on structural reforms to bring down the government the reforms in public financial management to debt to sustainable levels. important infrastructure development projects the introduction of the concept of Statement of and reducing the rural urban divide in the Corporate Intent as initiated by the Ministry of country. while also encouraging and facilitating private sector engagement. Management Bill would improve good governance while ensuring the optimum As fiscal deficit is projected to shrink over the utilization of resources. resources into these areas.

government paddy purchasing programmes. This implies that increased access to financing.8 incentivizing innovations. while official reserves would improvement programs for existing public sector remain above 5 months of imports. Domestically. the path of fiscal consolidation envisaged fertilizer subsidy in cash form with a view by the government would steadily reduce public to curtailing heavy use of chemical fertilizer. and GDP growth differential remains favorable.3 It is important to implement efficiency percent of GDP.284. also supported by tightening labour market conditions. Fiscal deficit is expected to decrease Developments in SME sector from the estimated 5. At the same time. Further. for instance. is a major determinant by resolving issues of SME sector following the of government’s debt management strategy. a further Real GDP growth is projected to accelerate to 6 decline in economic growth due to supply side to 7 percent level by 2020. aiming at primary balance improves from a deficit of 2. Maintaining a primary surplus. builds on the macroeconomic framework and the key risks may include the progress of timely proposed economic reforms by the Government. depreciation pressure as exports and other the utilization of carder positions remained at the financial flows grow and narrowing inflation level of 85 percent in 2016 due to the difference differentials. real to rationalize the expenditure while enhancing effective exchange (REER) which hovers above the productivity of the labour force. up of inflationary pressures witnessed in recent thereby mitigating any adverse impact of high months. enactment of the Micro Finance Act in 2016. the change of policy to provide As such. implementation of revenue reforms. government and beyond. containing the build to stay around 5 percent over the medium term. appropriate measures should need to inflation expectations on real demand. mainly supported Small and Medium Enterprises (SME) sector by increasing revenue growth and enhanced would need to be strengthened by providing expenditure management. Thus. Prospects of higher oil prices and between number of recruitments and pensioners. unemployment may stay around 4 percent and national investments may stay above Public Sector Employment 33 percent of GDP.384 by the end of 2016 while the existing the medium-term. As such be in place to help bring down the external debt wage growth would remain positive partly stock and lessen external sector vulnerability. population has shown an upward trend while nonetheless. Stabilizing the government debt-to-GDP ratio Continuous evaluations and reviews would need requires a sufficiently large primary surplus to be to be put in place to ensure that government’s generated over time so long as the real interest rate SME support policies deliver intended outcomes. would need to initiate measures to regulate and defined as the budget balance excluding of formalize the micro finance sector of the country interest payments. growth of imports of investment goods remain Ratio of the public sector employees to total a concern for external sector performance.MINISTRY OF FINANCE. Inflation is projected shocks such as droughts. The total the base year level (implying a real appreciation) carder approved for the entire public sector was is expected to adjust back to base-year level over 1. and timely implementation of reforms 7 . and imposition of various controlled prices to With regard to other key economic indicators.808 by the end of 2016. citizens in the country.4 percent of GDP in 2016 Chapter 01 | Economic Perspectives to 3.503. On the external sector. SRI LANKA | ANNUAL REPORT 2016 obligations. inter alia. protect domestic producers etc. assisted by easing of nominal carder was 1. debt below 70 percent of GDP by 2020. expected foreign financial flows there exists one public officer per every fifteen may counter such adverse effects. current account deficit is expected to remain at about 1. job creation and value percent of GDP in 2015 to a surplus by 2017 added products. Challenges to the medium-term budgetary Medium Term Budgetary Outlook outlook may remain significant on both The medium-term budgetary outlook 2018-2020 domestic and external fronts.5 percent of GDP in 2020.

Further. the regained GSP+ facility would help improve the outlook for Sri Lanka’s trade over the medium-term. These would further increase the Chapter 01 | Economic Perspectives risk to debt sustainability. hence. However. recent upward adjustments of government bond yields may warrant recalibration of debt servicing costs. including a shift in investor sentiment on emerging and frontier market economies and slower-than- anticipated growth in Sri Lanka’s major trading partners. SRI LANKA | ANNUAL REPORT 2016 on state-owned enterprises (SOEs). balance of payment risks remain significant. MINISTRY OF FINANCE. which would constrain Sri Lanka’s external demand. potential additional losses of SOEs. 8 . Externally.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 02 | World Economic Outlook World Economic Outlook 02 9 .

MINISTRY OF FINANCE.1 Russia -0.2 France 1.9 92.4 4 4.2 2.3 –2.9 21.1 89. SRI LANKA | ANNUAL REPORT 2016 2.8 0 181.9 percent supporting developments in both advanced economies and the leave. internal rebalancing strategies with the objective The United States Federal Reserve Bank of moving the country to consumption based increased federal funds rates by 25 basis points economy from an investment based economy.7 2 4 –3.6 1. quantitative easing in the form of Chapter 02 | World Economic Outlook performance is a result of weak global investment.8 0.2 0.3 2.4 107. The Euro area shifted to expansionary EMDEs.5 –5.1 Brazil -3.2 7 5.5 42.2 0.1| A Snapshot of the World . World Unemployment Social Outlook – Trends 2017 published by International Labour Organization (ILO) in 2017.5 –3.2 0.3 25.6 Japan 1 -0.6 -5.2 United States 1.2 239. 8.5 –2.1 3.5 50.3 Canada 1. Russia fiscal policies after moving away from five year and Argentina which suffered from deep Table 2.3 6.6 Malaysia 4. November 2016 .1 11.9 ….2 –14.8 4.3 38.4 Vietnam 6.8 67.6 62.3 Sri Lanka 4.9 –3.6 –2.5 Spain 3.8 51. and targeted longer- disruptions to the international trade and capital term refinancing operations will continue. monthly asset purchases.0 56.2 0.5 1.4 1. IMF.7 2.3 Chile 1. The Economic Outlook No 100 of OECD.7 11.3 .4 79.9 21. Annual Report 2016. emerging market and developing economies The Chinese economy slowed further as a result of (EMDEs)2.6 99. 1 This chapter is mainly based on World Economic Outlook Update in January 2017 of the IMF World Economic Outlook in April 2017 of the IMF.3 India 6.2 19. The European Central Bank’s accommodative monetary policy In 2016.2 United Kingdom 1. –6.7 46.8 4.8 0.8 1 3.5 5. Fiscal Monitor in April 2017 of the IMF. high debt levels and uncertainties Kingdom over leaving or remaining in the associated with several political and economic European Union ended 51.9 -0.8 6.9 –4.7 –2.7 –2. This sluggish or below zero. tightening financial referendum held on June 23.1 –4. The flows.5 5.4 4. June 2016 by WTO.3 10 –3.2 2.7 17 Singapore 2 -0.6 3.4 –3.3 96. Commodity Markets Outlook in January to April 2017 of the World Bank and Global Monthly in 206 and 2017of the World Bank. declining productivity.6 69.2016  2016 GDP Growth Unemployment Fiscal Balance Gross Debt (Percent Country (Annual percent Inflation (Percent) (Percent) (Percent of GDP) of GDP) change) Argentina -2.4 132.7 254.3 Thailand 3.2 Korea 2. Central Bank of Sri Lanka.3 4.2 -0.1 7 –1. The deep integration of the Chinese economy with the expectations of strengthening in labor into the world economy through trade linkages market conditions and a return to 2 percent created negative spillover effects specially in inflation.7 41.3 Sources : “World Economic Outlook”.3 112 South Africa 0.3 Australia 2. 2016 in the United conditions. IMF.3 –9 78.3 Mexico 2.8 0.5 Indonesia 5 3.5 2.6 Germany 1. April 2017.2 China 6. the global economy recorded the lowest which consists of keeping policy interest rates at economic growth since 2009. April 2017. World Economic Situation and Prospects 2017 of United Nations.6 8. “Fiscal Monitor”.6 4. Report on G20 Trade Measures.4 Venezuela -5.6 Greece 0 0 23.1 3.7 0. The economies such as Brazil.1 3.6 17.1 Overview long fiscal consolidation pathway.4 –6.9 58.5 27. 10 . Global Economic Prospects in January 2017 of the World Bank.5 –3. in December 2016 for the second time since 2015.6 –4.9 Italy 0.

for immigration.MINISTRY OF FINANCE.2 World Output European Central Bank continues a highly accommodative monetary policy together with The growth in the global economy was 3. uncertainties while diminishing the hopes for a Unemployment levels are still high in some fragile recovery.0 percent for advanced economies and 4.7 percent compared to 2. demand and exports. such and political challenges in neighboring economies as cuts in personal and corporate income taxes. Syria and Yemen have spending and possible changes in the policies already created deep recessions.3 percent The geo-political tensions in Middle East and growth.0 percent growth in heightened unpredictability linked to Trump the previous year because of the weak domestic politics.0 percent in the a slower pace of 1. 4. more infrastructure conflicts in Iraq. but with a downward trend. economies.1 percentage point lower than the weak Euro. spillovers from US fiscal stimulus.3 percentage points operations with the objective of encouraging lower than the growth of the preceding year. 2. substantial amidst the policy uncertainty in the region. The policy interest rates are still negative as the 2. slightly expansionary fiscal policies rate of the previous year. Commodity prices stabilized during the Reserve decided to increase interest rates by 25 year. high inflation. The US dollar appreciated as Fed supply. The projections for 2017 and accommodative monetary policies. SRI LANKA | ANNUAL REPORT 2016 recessions regained their growth momentum. However. However.1 middle of unpredictability over the European percent in 2015 while emerging market and Union’s future interactions with the United developing economies recorded a growth of Kingdom. in 2016. headline and core weakening is mainly due to poor investment. The investments lowered The weaker potential growth. but with uncertainty over macroeconomic African regions created refugee related economic proposals by the newly elected government. growth are high at 3. This was mainly due to 11 . Libya. inflation still remain below target levels. There may be spillover disruptions in institutions. macroeconomic imbalances and and business regulation. as well as in the European Union members. environmental standards loss of life. The bank lending. However. slowdown in investments and financial market further increased following the referendum vulnerabilities in EMDEs. The unemployment rate Chapter 02 | World Economic Outlook Organization of Petroleum Exporting Countries reduced to normal levels and consumption levels (OPEC) and non-OPEC countries to restrict the improved. trade.1percent. trade deterioration. 0. low private Oil prices recovered from 2015 historical low investments and manufacturing. basis points in December. Brexit and Euro zone elections.0 percent for EMDEs. feeble productivity growth The European Union started expansionary and mounting debt levels.1 quantitative easing and longer term refinancing percent in 2016 and this is 0. may amplify the above of the United Kingdom and US elections. following the agreement between the second half of the year. values and stabilized during the second half of the economic activities picked up during the the year.5 percent for the world. effects on the rest of the economies of the world. weak trade activities specially exports. Advanced economies grew at projected growth for 2017 is 2. The 2017 will mark as modestly brighter.6 percent which is a significant drop from 2. The fiscal stimulus package. the growth fiscal policies in 2016 after following fiscal regained in the second half of the year owing consolidation for five consecutive years and this to the recovery of commodity prices and global is expected to continue in the medium term. but The growth of Euro area economies slowed to another challenging year shadowed with 1.5 percent Japanese economic growth was 1.6 percent growth in 2015. supported by larger than anticipated exports and projected to grow at 1. The manufacturing. The outlook for 2017 is relatively strong with a projected 2.2 percent in The US economic growth slowed in 2016 at rate 2017.7 percent compared to 2. of 1.

Central Bank of Sri Lanka The economic growth of EMDEs varied among the moderate investment levels and growing the economies individually and regionally and consumption in 2016. The rapidly due to strong domestic demand and forecast for 2017 is further lowered at 6.3 Commonwealth of Independent States** -2.3 Thailand 2.0 United States 2. North Africa.6 3.2 3.2 percent in 2017.0 5.5 Euro Area 2. The growth in Emerging and to withdraw currency notes in circulation.2| World and Regional Output Annual percent change   Actual Forecast 2015 2016 2017 2018 World Output 3.0 5.3 Malaysia 5.4 6. The credit growth continues slowed slightly than the previous year.7 2.7 Emerging & Developing Europe 4. but a stronger government policy support is expected.0 2.0 1.2 0. SRI LANKA | ANNUAL REPORT 2016 Table 2.2 2.5 South Africa 1.0 4. The moderating since 2015.1 4.6 0.3 2.7 3.2 4.1 -1. East and Chinese economy grew at 6.8 1.0 1.9 2.5 1.9 3.8 -0.3 Middle East. country recorded a growth of 6.5 6.7 6.9 5. IMF.9 2.4 1.0 3.4 1. Afganistan & Pakistan 2.4 1.6 Sri Lanka 4.9 0.2 4.7 3.5 4.8 -3.0 1.7 6.2 1.8 percent and expected to grow by 7.5 Canada 0.5 3.0 Brazil -3.9 1.1 2.6 6.6 3.4 Pakistan 4.7 5.4 5.8 0.7 1.9 6.6 Italy 0.0 4.6 2.7 1.1 percent as a result of domestic challenges.0 percent and the economy from investment to consumption this is a further slowdown from 2015 growth of and from industry to service. Significant capital outflows placed exporters was weak due to relatively low pressure on the currency.7 Indonesia 4.2 1.6 Chapter 02 | World Economic Outlook Advanced Economies 2.2 Sub-Saharan Africa 3.8 Emerging and Developing Asia 6.9 6. disruptions owing to the government’s decision political issues.0 3.6 2.3 1. causing significant commodity prices and weak global trade depreciations.4 Latin America and the Caribbean 0.2 0.3 1.0 3.8 Spain 3.1 1. Indian economy was adversely during the recent past.7 percent and this South Asian economies are projected to grow was the lowest recorded growth in decades.4 6. The Developing Asia was robust at 6. This lowered growth trajectory is due The Latin American and Caribbean economies to the internal process of sectoral rebalancing of recorded a negative growth of 1.6 1.7 2.1 5. April 2017 Annual Report 2016.5 France 1.1 Japan 1.6 percent.3 0. The success of the 0.2 India 7.8 1.2 1.8 7.4 3.0 Sources : World Economic Outlook.3 0.4 1.8 4.2 1.8 2.6 1.2 7.2 1. MINISTRY OF FINANCE.6 Germany 1.0 1. government’s policy efforts are evidenced by low commodity prices and macroeconomic 12 .4 percent. The growth of Middle affected by cash shortages and payment East economies was adversely affected by geo.6 United Kingdom 2.0 6. but still higher than the performance by fuel and non-fuel commodity GDP growth.8 0.7 6.5 4. accommodative macroeconomic policies.4 China 6.7 Vietnam 6.1 3.2 3.2 6.0 Emerging Market and Developing Economies 4.4 2.1 Russia -2.

1 -0. core inflation of all advanced economies -3.2 3.7 4. area inflation is projected to be at 1. investment Asia China 1.4 Euro Area 0. IMF.7 from the recession prevailed in 2015.8 5. Afganistan & Pakistan Actual Forecast Sub-Saharan Africa 2015 2016 2017 2018 Advanced Economies 0.3| Inflation Commonwealth of Independent States Latin America and the Caribbean Annual percent change Emerging and Developing Europe Middle East. The inflation in China rose to 2. Emerging and Developing 2.3 5.7 percent in the previous and deflationary pressures softened.9 4.3 percent.MINISTRY OF FINANCE.1 0.7 2.0 8.5 Commonwealth of Independent States emerged Germany 0.3 Spain -0. North Caribbean Africa.6 7.3 Given the close linkages in trade.2 Developing Economies prices and improvements in domestic demand. improving France 0.2 5.5 -0.4 2.2 1.8 percent reflecting stabilizing oil Emerging Market and 4.3 Inflation However.7 5.4 percent from the 3.5 Sri Lanka 2.1 1.1 1.4 percent in 2015 due to uptick 13 .7 5.7 The economic activities of Middle East.4 1.3 percent in 2016 and the Italy 0.5 7. Independent States** Russia 15.0 Advanced Economies Emerging and Developing Asia Table 2.0 11.1 0.4 2.7 9. high energy prices Annual percent change 5.3 over to the entire region.3 3.0 1.2 2.1 region.7 4.5 4. North Africa.2 Latin America and the 5. Afghanistan & Pakistan region improved Brazil 9.0 considerably slowed to 1.0 2.5 percent growth of 2015.0 1.3 5.1 7.1 1.5 5. 5.9 percent compared to 2.7 1.1 | Regional Output : 1999-2018 The expected 2.3 1.4 in oil prices and geo-political uncertainties of Afganistan & Pakistan the region.0 Source: World Economic Outlook. slightly above the target in 2017 and the regional growth forecast is 1.0 4. Chapter 02 | World Economic Outlook economies of the region.3 at a growth of 3. The consumer price inflation in advanced with a slight improvement from the preceding economies rose to 0.5 8.8 percent from the lowest year’s growth of -3.4 2.1 0. the inflation in EMDEs lowered to The global inflation increased slightly in 2016 4.6 improvement from the previous year’s negative Canada 1.6 2.0 percent in 2017. SRI LANKA | ANNUAL REPORT 2016 imbalances. Nevertheless.4 2.4 growth projection for 2017 is 1.5 4. mainly year.0 1. April 2017 2. -5.4 percent from 4.0 remained below central bank target levels.7 5.5 Europe percent in 2015.7 2.0 percent due to the rise in energy prices and energy in 2016 from 1. Brazil recorded a negative growth related products during the latter part of the for the second consecutive year at -3.4 4. South Africa 4.7 percent.7 percent reflecting the rise in the energy and food prices.5 2. Chart 2.0 and wage-price pressures.3 and remittance between other economies in the India 4.9 4.2 4.5 2.0 0.8 2.5 percent inflation in the United Kingdom is owing to depreciation of the sterling 11.1 growth of 2. owing to the decline Middle East. North Africa. However.4 1.0 2. The Euro percent.9 3.9 United States 0.6 Russian negative growth of 0.3 1.0 6.0 low inflation is expected to rise to 1.2 with a growth of 0.3 2.2 5. this positive outlook is projected to spill Commonwealth of 15. Brazil and Argentina The inflation in the United States is expected to are projected to be recovered from the recession be 2.4 10.0 9. The Japan 0.0 -7. The Japanese 7.7 percent in 2017.3 6.6 6.0 5. as IMF 1999- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 reports.2 3. the economies in Sub-Saharan Africa Pakistan 4.1 1.1 levels of the Federal Reserve Bank.7 Emerging & Developing 3.0 pound and rise in energy prices.7 4.9 4.8 -0.3 0.0 0. due to depreciating yen.8 percent.7 4.0 3.4 Sub-Saharan Africa 7.2 percent is an United Kingdom 0.6 percent year. The two largest recorded inflation in 2015 which was 0.

Azerbaijan.S. MINISTRY OF FINANCE. Projecting a steady growth in the country.0 followed by sharp exchange rate depreciations.5 percent. 2016 as the second Fed rate hike in since The historically high LIBOR on six-month U. Percent 10. 2017. The inflation in Argentina is expected to asset purchases.0 2. The London inter-bank offered rate (LIBOR) making borrowing less expensive.6 percent in 2017. the 2 2012 and this continued until the beginning of year Treasury bond which is the most sensitive to 2015. the central bank of Mexico increased interest rates thrice in 2016 and this Advanced Economies Emerging and Developing Asia was followed by a sharp depreciation of peso. making the the target Commonwealth of Independent States reduced range for federal fund rate from 0.0 Independent States reduced their interest rates in order to diminish the inflationary pressures.00% 2. hyperinflation in Venezuela remain negative as the Bank of Japan expects increased to 254. where as the initial rate hike in 2015 was dollar deposits started to decrease since January by similar basis points. With the speculations over possible US Fed rate hikes.0 8. IMF 2009.0 6. 3.00% Percent 4.5 percent in 2015. Mexico. The inflationary pressures in points on March 15.3 | Monthly Movement of Six Months LIBOR The IMF projection for advanced economy 6.0 Most central banks in Commonwealth of 14.S.0 percent and the projections for 5.06 percent federal funds rate by 25 basis points on December compared to the average of 0.0 The significant low levels of policy rates were 4. Even though Brazilian inflation reduced by 3 percentage Meanwhile.00% 2. South Africa and Sri Lanka were 20. 15.2 | Regional Inflation: 1998-2018 Angola.7 percent.0 12. After this decision.00% inflation is at 2. be 25. has projected LIBOR on six-month U. Nigeria.9 percent from 121.S. The framework with the objective of anchoring 10- projected inflation for 2017 is 720. Commonwealth of Independent States Latin America and the Caribbean Emerging and Developing Europe Middle East. The recent interest rate hikes in EMDEs like Chart 2.0 recorded in major developing economies in East Asia. The Federal on six-month U. Chapter 02 | World Economic Outlook and subdued domestic demand.00% Jan-05 May-05 Jan-06 May-06 Jan-07 May-07 Jan-08 May-08 Jan-09 May-09 Jan-10 May-10 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 Jan-14 May-14 Jan-15 May-15 Jan-16 May-16 Jan-17 May-17 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 The prevailing low interest rates since the global financial crisis encouraged advanced economies and EMDEs to borrow more internationally. However. hit the highest value since August Federal rate hike it started to uptick again. dollar deposits significantly Reserve Bank of the United States increased increased in 2016 and averaged at 1. Mozambique.00% emerging market and developing economies is 4.4 Interest Rates 1. 16.7 percent in to continue the “quantitative and qualitative 2015 as the economy faces deeper crisis.75 percent to significantly with the stabilization of currency 1. 2008.0 18. shortage monetary easing with yield curve control” of basic goods and large financing needs. Egypt. dollar 14 .0 percent. The year Japanese Government Bond yields at around Russian and Brazilian inflation is to be declined 0 percent and the European Central Bank aims at as a result of the measures taken to reduce the continuing policy interest rates at or below zero currency depreciations and administered price and quantitative easing in the form of monthly hikes. North Africa. SRI LANKA | ANNUAL REPORT 2016 in producer prices and recovery of real estate Fed increased Fed funds rate by another 25 basis investment. Namibia.7 percent due to high commodity prices. Afganistan & Pakistan Sub-Saharan Africa Chart 2. interest rates in Euro area and Japan points to 8.

10 per day in purchasing power terms. respectively. 2015 to 4. (ii) improve the quality 2.3 percent in 2016 to 6.6 Fiscal Situation of employment for those with a job. Euro area is still suffering from high as envisaged previously.e.6 percent in 2016 to will be broadly neutral fiscal situation and. connected with limited access to contributory month Euro deposits is expected to be averaged social protection schemes is projected to be at -0. Spain and the United Caribbean economies and mainly in Brazil.8 percent in 2018. As IMF identifies. the population will be 210 million.9 percent in 2016. and (iii) ensure that the gains of growth are shared in European economies changed the fiscal an inclusive manner”. a fall in and this was mainly contributed by China. Italy Emerging market and middle-income economies with 11. SRI LANKA | ANNUAL REPORT 2016 deposits to be averaged at around 1. Even though prospects public debt stock of these economies is expected for advanced economies are favorable with a to remain stable but at an average above 100 reduction from 6.2 percent percent in the medium term. The two most affected regions are Southern Asia and sub-Saharan Africa. As highlighted in World Unemployment US$ 3. especially in Latin American and mainly contributed by Italy. in 2017 and 2018. However. moderate working poverty was 29. supporting public investments under such environment and supporting social This increase will largely be contributed by expenses such as pensions or refugee-related the deteriorating labour market conditions in spending. unemployment at 10 percent i.7 for 2017.4 million in 2017 and the total unemployed their fiscal stance in 2016. As a result there to be increased from 5. over governments’ ability to “(i) generate a sufficient number of jobs. including the United States and Canada. the global economy faces challenges percent in 2017. This is expected to be 1.5 Unemployment about half of the workers in Southern Asia and two-thirds of the workers in sub-Saharan Africa The ability of governments to create employments are suffering from working poverty either at is linked with the economic performance of the extreme or moderate levels i.0 percent in 2017 and will grow by 11 million per year. mainly due to slow unemployment rate significantly to 4.e. Germany has reduced the fourth consecutive year. Portugal at 11. high uncertainty.7 percent. LIBOR on six-month Japanese yen of the world. This fiscal policy transformation was the EMDEs. followed by Spain at 19.1 percent and faced elevated fiscal deficits in average for the France at 10 percent. the 5.3 and -0.MINISTRY OF FINANCE.6 percent in 2016.3 percent of countries.9 economic growth and low commodity prices percent prevailed in 2015. Greece at 23. The States considerably and by Canada and Germany average unemployment in EMDEs is projected in a relatively lower scale. 2.8 percent. without declining in 2017. At the same time. remained at 42 percent of the total employment Chapter 02 | World Economic Outlook respectively. The US but the reasons for such increase vary among the unemployment has decreased from 5. This will be a reasons behind this fiscal easing are supporting modest increase of 0.1 percentage points to 5.7 percent in 2017. Social Outlook – Trends 2017 published by the The percentage of workers living in extreme or International Labour Organization (ILO) in 2017.6 percent. According to the report. unemployment rates are expected for this region. expends less than country. consolidation pathway which they have global unemployment is expected to be increased continued for five consecutive years and loosened by 3. Brazil and oil exporting economies. The fiscal but with a slow improvement.2 percent in 2017 and 2018.2 from 10. LIBOR on three.7 percent The vulnerable employment which always in 2017 and 2.4 percent in considering the unpredictable growth prospects 2016 and ILO expects this to be declined to 28.4 billion deposits is expected to be averaged at 0.7 the economic growth in circumstances with percent from 5. 15 . There are signs of deficit increased for the third consecutive year structural unemployment in advanced economies in average in low-income developing countries.

0 -4.6 -4. The fiscal deficit of oil percentage points to 3.3 -3.7 -2.0 -4.4 -3.7 China -2.1 -7. the uncertainty over the consequences of United Kingdoms’ “Brexit”.4 -2.4 -3.7 Thailand 0.5 -2.0 -3.6 -4.7 -5.9 percent of GDP.7 -2.4 activities in all economies. IMF.6 -3.8 percent of GDP.8 -4.4 -4.8 -2.4 -4. low commodity prices Low-Income Developing Countries -4.4 percentage points compared to 2015. of these economies at elevated levels.0 -3. political experienced high fiscal deficits as a result of the instability of several large EMDEs.6 -6.3 -9.5 Euro Area -2.7 year due to policy changes in advanced United States -3.1 -2. producing economies is expected to improve in 16 .1 0. Table 2.7 percent GDP.5 -3.4 -3.3 percentage points to 3.6 -3. The low-income developing economies Chapter 02 | World Economic Outlook the elections in France and Germany.5 -4.6 middle-income economies recorded the highest Brazil -10.7 -2. April 2017 Africa were the reasons behind this widening Annual Report 2016.5 -2.9 and other uncertainties created by geo-political Oil Producers -4.1 2016 from 3.4| Overall Fiscal balance 2.5 -3. slow economic South Africa -3. their commodity products and also due to other tighter financial conditions.0 percent.3 percentage points Portugal -4.9 -3.9 -4.2 -6.7 -3.7 -3.4 -3.0 -2.6.8 percent Amidst several uncertainties.2 Russia -3.3 percent of GDP in the following Advanced Economies -2.6 and low-income economies and low commodity France -3. as the government spent more on public of GDP.3 -3.5 -5. advanced economy of GDP in the previous year to 3.5 Italy and Spain.2 -4.1 -1. It is Income Economies expected to boost short-term economic activities Asia -3. geo-political drop in commodity related revenue in line with tensions in Middle East and Africa. slow economic growth.5 -1. with the stabilization of oil prices and fiscal uncertain as the size and composition of the US consolidation.7 0. MINISTRY OF FINANCE.4 -1. SRI LANKA | ANNUAL REPORT 2016 The outlook of global fiscal policies in 2017 is 2017.6 -5.9 Average fiscal balance of emerging market and Latin America -7.6 percent of GDPin World -3.4 -2.8 related revenue. the Japan -3.5 to 2.4 -3.9 -3. low energy prices and contingent exchange rate depreciations made the debt stock liabilities remain as risks to the fiscal outlook.1 -2. Indonesia -2.9 Pakistan The fiscal stimulus in China. Japan.4 fiscal balance widened by 0. while the average deficits of emerging infrastructure and cut tax revenue with the market and middle-icome economies and low- objective of increasing economic growth up to income economies are expected to be 4. Middle East and North Africa and -8. slow economic activities in middle Germany 0. reduced demand for above uncertainties. fiscal stimulus is not clear.7 -1.5 -3. appreciation of the country specific reasons.2 percent of GDP.8 -3.0 -9. Europe -2.4 percent of GDP.1 -6.7 percent of average fiscal deficit is projected to be 2. regardless of the tightening of fiscal position.0 -4.2 economies.3 United Kingdom -4. increase public investment in Malaysia -2.4 -4.5 -2.2 -6.6 -1.1 Fiscal Deficits Percent of GDP Actual Forecast The average fiscal balance of the world widened 2015 2016 2017 2018 by 0.4 percent the target levels.4 and create employment amid high economic India -7.9 -3.2 -3.3 uncertainties specially in the Unites States.5 -5.4 -6. China’s fiscal deficit widened from 2. Brazil’s improvement from 10. Despite the low commodity prices.9 -2. Average global economic recession and political issues is due fiscal deficit is projected to be decreased by 0.0 Canada.4 -9.9 -3.5 value in two decades at 4.8 tensions among the countries in Middle East and Sri Lanka -7.5 -4.5 -1. Central Bank of Sri Lanka of 0.6 -5.8 social spending in Germany.0 -3. Advanced economy average Italy -2.2 -2.6 -2.3 of GDP in 2017 with the expected gradual percent of GDP to 9.9 countries accounted as 0. Australia and New Zealand and increase Vietnam -6.6 -1.6 0.4 -4.3 Sources : Fiscal Monitor.9 -3.2 to low interest payments. According to the IMF.2 -3. The rising deficits and US dollar.8 0.7 -2.1 2016 relaxation of the overall fiscal stance of these Emerging Market and Middle -4.4 -6.

0 89.3 percentage points in low-income developing mainly advanced economies afford sovereign economies from 36. From 2014. low commodity Middle-Income Economies Asia 45.5 | General Government Gross Debt will lead their debt to increase further in the Percent of GDP Actual Forecast medium term.4 54.5 97. the net outflows from EMDEs debt as a percentage of GDP.1 40.6 91.1 17.4 74.6 107. Central Bank of Sri Lanka in advanced economies. the only reason. United States 105.3 36.0 depreciations.5 percent to 47.7 commodity importers economies is mainly due Canada 91.8 situation related to the slow growth.3 81. following percent.5 percentage point growth in advanced the global financial crisis. higher Advanced Economies 105. reform in healthcare system and more security spending Table 2. A recent study a 239.3 60.6 79.4 107.0 88.6 denominated debt constitutes the major portion Spain 99. 2.9 Euro Area 92.8 demand from importers.3 90. Countries The net flows to EMDEs surged after the global Sri Lanka 77.4 48.0 Low-income Developing 36.7 Capital Flows and Financial Market Middle East and North 33.5 75.6 The capital flows to EMDEs recovered in 2016.1 percent 40. but started to decline Global economy experienced an increase of 3.7 Mexico 53.6 percent in 2016.0 132. Japan debt servicing costs and would have eventually is the most indebted nation in the world with pushed them for more borrowing.0 58.3 91. However.MINISTRY OF FINANCE.4 108.3 77. from 80.9 percentage Public debt stocks increased in both advanced point increase in EMDEs from 44.2 67.8 73.2 49. SRI LANKA | ANNUAL REPORT 2016 2.0 239.8 2.6 97.9 41.7 financing cost and subdued commodity prices.2 89.8 99.3 180.8 48.3 Latin America 55.4 economies and EMDEs significantly. high public investments and current Russia 15. personal and business income tax cuts. However.4 181.9 of the total debt stock.3 108. but the differential between the interest and growth rates.5 78.6 83.0 17.4 percent and the significant increase of global interest rates which made governments.4 percent.7 76.2 56.7 62.5 52.9 17. the net inflows peaked at US$ 615 billion. 4.2 82.3 98.6 percent term reason behind this increase is the decline of from 105.7 spending and high interest expenses.6 132. April 2017 Annual Report 2016.4 Japan 238.4 41.2 Government Debt in 2015 to 83.1 88.6 83. which smaller IMF expects that public debt in advanced differential will increase the debt levels rather economies will stabilize in the medium-term.2 96.6 64.8 66.3 revenue.8 131.2 239. This will allow consolidation process.1 financial crisis. In 2010.2 percentage points over 2015.5 52.6 92.6 46. the United governments to sustain debt without tight fiscal States’ plans for a reform in taxation with policy stance.5 47.3 Africa (MENA) Behaviour South Africa 49.5 Ireland 78.8 to widened fiscal deficits caused by declining Emerging Market and 44.2 89.7 32.7 181.1 60.4 97.6 percent to advanced economies started and according to 17 .6 69.6 The continuous strengthening of the US dollar Germany 71.0 thereafter as a result of the slowdown in global percentage points in General Government gross growth. The elevation of public debt levels is contributed by 2.6.4 increase the debt service burden if the US dollar Italy 132. The rest of the economies suffered India 69.7 58.2 and oil prices and also due to exchange rate China 42.1 106.2 percent of debt to GDP ratio with an of the IMF points out low interest rates are not increase of 1. Brazil 72.0 against developing economy currencies will France 96.1 from country-specific reasons such as low tax Europe 30.2 239. The rise in government debt 2015 2016 2017 2018 in EMDEs is increasing due to the weak fiscal World 80.3 52.6 107.5 50.9 36.1 82. Greece 179. slowly or reduce debt levels rather quickly but at higher levels. mostly due to low interest rates Sources : Fiscal Monitor.5 67.1 57.8 32.6 49.8 38.8 50. the long- Chapter 02 | World Economic Outlook economy debt which increased to 107. as they have eased fiscal for a given primary deficit.2 32.4 The significant increase in low-income developing United Kingdom 89. IMF.

after the US elections According to the World Bank. The financial were moderate within the year. In commodity importing depreciated to record lows following the UK emerging markets and developing economies. and debt overhang situations of these countries The slowdown in both categories reflected if the amount of debt stock denominated in UD financial market volatilities caused by political dollar is significant. referendum to leave the Euro zone “Brexit”. January 2017). high inflation following the US election. net outflows amounted to US$ 543 billion in 2015 and US$ 456 billion in 2016. 13 the sluggish investment growth owes to slowing percent against the US dollar and 11 percent foreign direct investments (FDI) and weak against Euro. and economic uncertainties around the globe. Renminbi was affected by capital outflows from The international financial markets were China and depreciated by around 7 percent against relatively stable in 2016 as policy rate hike in US dollar in 2016 (Global Economic Prospects. the Japanese yen. 18 . In October 2016. However. The economies having strong financial or depreciated significantly against US dollar. MINISTRY OF FINANCE. trade policies. Currencies of commodity exporters in both advanced and EMDEs strengthened during 2016 with the stabilization of commodity prices. against the US dollar. Therefore the EMDEs should take necessary steps to strengthen supervision and regulation of the financial system to avoid such external shocks. The immediate withdrawal were avoided by timely and rapid response by of the Indian currency in circulation with the the central banks of the advanced economies to introduction of new notes caused depreciation stabilize the markets. The US Chapter 02 | World Economic Outlook At the same time. the 10 percent and Fed rate increase. SRI LANKA | ANNUAL REPORT 2016 the United Nations World Economic Situation 2. This interest rate differential economic activities of advanced economies. the United States was slower than expected WB. and the British referendum of the United Kingdom on “Brexit” sterling pound. while deprecating conditions of these economies tightened further. the euro. The resulting currency depreciations of was affected by the disturbances associated with EMDEs will aggravate debt servicing burdens international trade and escalating debt stocks. investment growth in developing economies has slowed since 2010. trade links with international markets are highly Nigerian naira lost about 40 percent against vulnerable to adverse impacts of tighter financial the US dollar as the peg to the UD dollar was conditions or negative spillovers of adverse removed in mid-2016.5 percent in 2015. The Democratic Republic rise in US bond yields towards the end of the of Congo franc and the Mozambican metical year. US dollar appreciated by investment growth in 2010 has dropped to 3 percent against the Euro. sterling pound 3. volatility and financial vulnerability in China made financial markets in EMDEs to be remained Currency movements in low income countries under investor uncertainty. The between the United States and other advanced investment growth in commodity exporting economies will cause US dollar to strengthen emerging markets and developing economies further. the volatility of Indian Rupee. but in relatively lesser following the appreciation of the US dollar and amounts than in 2015.8 Currency Movements Prospects 2017. Latin American and Caribbean associated with policy shifts including sharp economies experienced currency depreciations exchange rate depreciations. dollar started appreciating. The Special Drawing Right (SDR) along with the US repercussions that would arise from the June dollar. renminbi and unconventional monetary policies like was introduced in the basket of currencies that quantitative easing continued in other advanced makes up the International Monetary Fund’s economies like Japan and European Union. But.

55 70 Imports by advanced economies increased by 60 2.9 2.9 13. while implementing creation of those countries.9 World Trade and this is a significant achievement over the The slowest pace of world trade since the global contraction of 0. financial crisis of 2009 was recorded in 2016. exports by weak trade in major EMDEs like China and EMDEs picked up by 2.6 11.6 -10.7 3.7 3.9 4. specially North American Table 2.4 3.4 5.4 percent in 2016 and this is relatively low 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Apr 2017 growth compared to the growth of 4.3 3.9 Imports Advanced Economies 5. In contrast.8 3.3 Source: World Economic Outlook.05 120 in developing economies has caused lower trade Chapter 02 | World Economic Outlook 0.8 percent in the preceding year.65 80 recovery in 2017 and 2018. 0. but also on the output 100 trade facilitation measures.9 4.2 5.4 | Exchange Rates Against US$: 2004 .4 percent USD/Euro USD/Pound USD/Yen in the previous year. Weak global investment. not have applied 145 new trade-restrictive measures only over the economic growth and employment since mid-October 2015.8 -7.MINISTRY OF FINANCE.0 Emerging Market and Developing Economies 10.5 4.1 3. SRI LANKA | ANNUAL REPORT 2016 Chart 2.6 | World Trade Volumes Annual percent change Actual Forecast 1999- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 World Trade Volume (Goods and Services) Volume 6.8 1.0 6.2 2.5 3.7 2.85 100 increasing inward-shift in policies which are USD/Yen 0.95 elasticity. IMF. Outlook No 100 of OECD. At the same time. G20 economies the United States will have an adverse impact.6 -11.6 -11.7 2.0 -9. Similarly.4 4. The Economic and development of their trading partners.8 1.75 more oriented towards the anti-globalization 90 or protectionism will soften the prospects of 0.9 3.5 5.5 3.1 12.7 percent in 2015. April 2017 The new wave of protectionist policies that may be As highlighted in the Report on G20 Trade adhered by some advanced economies including Measures.0 -0.4 2. This was contributed by strengthening of trade According to World Trade Organization (WTO).7 8.5 11.0 2.5 3. November 2016 19 . USD / Euro & Pound 0.4 2.6 14. imports by EMDEs increased by 1. in China.5 12.5 7.2 3.5 4. India.2 3.1 percent relative to the growth of 3. Independent States. countries. exports by the advanced economies grew by 2.2 Emerging Market and Developing Economies 8.6 4.0 4. uncertainty 110 about the US and European trade policies. Russia and Commonwealth of this stagnation is due to slow growth in GDP.3 Exports Advanced Economies 5. The slower participation in global Apr 2017 value chains noticeably by the United States and Japan in the advanced front and by China 1.1 1.7 2.4 percent in 2015.1 2. advanced economies. June 2016 by WTO.5 percent compared to the Brazil and also due to low import demand from growth of 1.3 4.9 percent 2.

7 | Price Indexes (2010=100) and the market is expected to be rebalanced due to the steady and broad based demand 2012 2013 2014 2015 2016 2017 and low production investments by non-OPEC Energy 128 127 118 65 52 63 producers. non-OPEC commodity prices were stable during the year as producers decided to cut nearly 0.5 million barrels per 2008. This is comparatively 2. and leave reduce the excess capacity in steel and aluminum. Fertilizers 138 114 100 95 83 84 Metals and minerals 96 91 85 67 61 64 Coal prices increased in 2016 because of the production cuts in China following government Precious Metals 138 115 101 91 89 88 restrictions and also due to Australian production Source: Commodity Market Outlook. Chapter 02 | World Economic Outlook countries in a worsened fiscal position. At the same time. Following this decision. The projections for 2017 and 2018 are US$ 50 and US$ 60 per barrel respectively Table 2. this is a reduction of nearly earlier predictions for supply disruptions in the 1. expected fiscal policy fiscal initiatives on domestic and global growth. Even though. Even from US$ 96 per barrel from the preceding year.” The average price of a barrel of crude oil dropped by 16 percent further to US$ 43 in 2016 from US$ 51 in the previous year. OPEC decided in late September to to restrict the oil supply for the first time after limit the production to 32. the sustainability of the Non-Energy 110 102 97 82 78 80 projections may be diluted by an increase in US Agriculture 114 106 103 89 86 88 shale production and possible loosening of strict environmental regulations in the United States. stimulation in the US and Chinese attempts in raise prices. there were October.78 in January 2016 and rebalanced during between Organization of the Petroleum the latter part of the year due to decline in non- OPEC production as well as due to increase in Exporting Countries (OPEC) and other producers demand.6 mb/d in supplies were adequate.8 million barrels per day. Altogether. harm living standards.10. MINISTRY OF FINANCE. Trade Average gold price increased during the year. Libya. There are expectations to continue this which follows El Nino which is unusually warm production cut to the second part of 2017 and if ocean temperatures in the same region). energy prices dropped during the first The price of an oil barrel plummeted to US$ quarter. more than 25 percent of jobs depend on foreign demand. but cost of drilling Oils and Meals 126 116 109 85 82 85 of shale has reduced due to efficiency gains and Grains 141 128 104 89 84 86 improvements in management. SRI LANKA | ANNUAL REPORT 2016 suggests “that protectionism and inevitable trade Metal prices were strong as a result of high retaliation would offset much of the effects of the real estate investments. The price of metric tonne of Australian coal increased to US$ 65. later gained owing to the agreement 29. World Bank and shipment outages. Oil prices are expected to remain strong day (mb/d) during the first half of 2017.9 from 20 . 2. but worsens prospects and lowers well-being for many others. April 2016.10 World Commodity Market less than the historic drop of 47 percent in 2015 Commodity prices strengthened in 2016. protectionism shelters some jobs. though. However. during the year. Raw Materials 101 95 92 83 81 83 Nigeria and Venezuela. This is due to better global growth prospects and the first agreement to restrict the production of related improvements in activities. later it is sustained.1 Energy Prices In many OECD countries. Southern hemisphere due to La Nina (unusually cold ocean temperatures in the Equatorial Pacific. Other Food 107 104 108 100 98 99 there are upward threats due to geo-political uncertainties of oil producers like Iraq. Agricultural oil since 2008. the market conditions will tighten those fears were diminished. Beverages 93 83 102 94 89 89 The shale production is currently at low levels Food 124 116 107 91 88 90 amidst record high US stocks.

The price of Aluminum dropped in beverages is mainly due to 7.5 percent.40 2015. The raw materials 100 90 80 are projected to be increased by 2 percent.10. after decelerating production forecasts for Brazil.6 percent to US$ 1. storage The projections for agricultural prices are concerns over winter supplies. SRI LANKA | ANNUAL REPORT 2016 US$ 57. demand for 2015 due to low stocks triggered by a growing gold from its biggest consumers India and China.8 percent price by 3.6 by 9. tin and zinc picked up by 4. The prices of palm oil.6 percent to US$ 167 a metric tonne from Price of precious metals increased during the year US$ 204 a metric tonne in the previous year. because of the Chapter 02 | World Economic Outlook increase in demand for power/heating. 2017. Ghana and 10 Nigeria. The iron of La Nina was minimized. of copper dropped by 11.5 and 16.868. a decline of 3 percent is projected for grain price.2 percent high demand from China who contributes for respectively.2 Agricultural Prices 2. while beverage Chart 2.6 and US$ 64.10. However.30 per kilogram in 1.3 Metal Prices Agricultural commodity prices stabilized in Metal prices dropped by 6 percent in 2016 mainly 2016 owing to the adequate supply. price also ended at US$ 57. which further widened significantly fell during the latter part of the year.5 | Crude Oil Prices: 2010 . The upward risks for the agricultural prices extends from fertilizer and energy prices 2014 Apr 2015 Apr 2016 Apr 2010 Apr 2011 Apr 2012 Apr 2013 Apr 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2010 Jan 2011 Jan 2012 Jan 2016 Jul 2017Apr 2013 Jul 2014 Jul 2015 Jul 2010 Jul 2011 Jul 2012 Jul 2014 Oct 2015 Oct 2016 Oct 2010 Oct 2011 Oct 2012 Oct 2013 Oct Crude oil. The price of a metric tonne of rice (Thailand 5%) The US policy orientation towards infrastructure increased by 2. high coal price expected to be upward oriented modestly in and nuclear outages in France. The drop metric tonne. driven by the excess supply.1 with an soybean oil and groundnut oil increased during increase of 10 percent and 12 percent respectively.6 percent to US$ 58.604 and a metric tonne decline in cocoa.4 per decreased while food prices increased.5. the year. Canada and Ireland. the annual average price of wheat (US HRW) fell by 18.161 per ounce in 2015. Gold price increased to US$ 1.6 percent to US$ 396 per metric spending will also extend an upward pressure on tonne from US$ 386 a metric tonne in 2015 and metal prices due to anticipated high consumption. Prices are projected 2.5 percent following declines in Kolkata and to be increased by 11 percent in 2017 owing to Mombasa auction prices by 1. 11. Grain prices decreased due to about half of the global metal consumption and larger than expected harvest of rice and better reduced supply due to the closure of lead and production expectations for wheat and maize. The drop in India is mainly due to the government 21 .249 from US$ per kilogram from US$ 0.Apr 2017 price forecast is to be declined marginally. Downward risks may arise from government policies of production countries supporting agriculture sector. Zinc mines in Australia. Prices of beverages ore price increased by 4.4. According to the World Bank.7 percent to US$ 4. as evidenced by an increase of 8 and 9 percent in The annual average price of a kilogram of sugar troy ounce of gold and silver respectively over increased significantly by 34 percent to US$ 0. The USD/bbl 70 60 beverage prices are expected to be declined by 50 40 further 6 percent due to excess production in 30 20 West Africa including Côte d’Ivoire. 2.MINISTRY OF FINANCE. The Columbian and South African coal India and Thailand. The impact due to the decline in Chinese demand. production-demand gap. The projected increase in oils and meals is 3 percent 140 130 due to the expected tight supply of palm oil from 120 110 Indonesia and Malaysia as well as of soybean oil from Argentina and Brazil.2 percent respectively. The price of natural gas increased. Even though Colombo tea auction price increased Prices of lead. tea average price dropped by and 8. average Brent Dubai WTI and La Nina cycle.

700 1. pressurized with an upward trend. it may jeopardize the dollar is appreciating as market expects that US economy as well as economies that have close Fed will continue in raising policy rates and the trade linkages with the country. as this is an election This also is evidenced by the depreciation of Sri year in some major economies. The net outflow of foreign investments administrative barriers to trade and imposing in the government securities market amounted policies suitable for a higher middle income.800 1. the government securities yield rate is still framework for macroeconomic management. such inward Since Sri Lanka’s strategic location facilitates easy oriented trade policies in these economies may reach to any regional destinations i. The continuous 22 . respectively.000 2016 Sep 2014 Sep 2015 Sep 2012 Sep 2013 Sep 2017 Jan 2015 Jan 2016 Jan 2013 Jan 2014 Jan 2012 Jan 2015 May 2016 May 2012 May 2013 May 2014 May 200 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2.200 1. Following the and increase in tariff will be implemented by the US elections and also the Fed decision.300 1. the from financial markets of EMDEs due to possible government has identified the requirement of changes in investor sentiments and this have attracting and retaining efficiency-seeking foreign to be avoided by pushing EMDE interest rates direct investment. most of flows.750 1. MINISTRY OF FINANCE. a prudent policy 2015.050 1.650 1.093. According to the Central bank of Sri aimed at eliminating unnecessary regulatory and Lanka. to US$ 324. Led capital outflows to become an upper middle income country. The average the external shocks is essential. Europe. as key driving forces of the net outflow of US$ 1. and reduce market sentiment while having the EMDE currencies are depreciating heavily.11 Summery which the European Union has approved the GSP plus trade concessions to Sri Lanka.3 million during the year 2016. the US United States authorities. reduce global growth and trade.2017 Chapter 02 | World Economic Outlook Gold Price Behaviour: Jan 2012-Apr 2017 1. contagion effects in Europe.400 1.550 1. East. SRI LANKA | ANNUAL REPORT 2016 decision to take Rupee notes out of circulation as such as gold and real estate to financial products. hinder capital In line with US dollar strengthening.800 1.600 Price (US$/Ounce) 1. the developments of changing global markets create benefits as US Fed Reserve’s decision to raise the policy rates well as challenges for the country’s economy twice by 25 basis points in last December and through economic linkages. strengthening fiscal though this is a reduction when compared with space and sustainability.100 400 1.350 800 1. weighted yield on 10-year Treasury bonds and 5-year Treasury bonds increased by 117 and 197 If protectionist policies such as trade barriers basis points.600 1. Middle East and Africa.400 1. Even export-oriented economy.250 1.150 1.4 million during the country’s growth. Hence. In a situation of Lankan Rupee in the recent past. Such policies will positive growth expectations of the US economy.450 1.6 | Gold Price Behaviour: 1960 . a step to shift investments from physical assets Chart 2.200 600 1. pushing debt addressing domestic vulnerabilities to smoothen servicing expenses to elevated levels. respectively in 2016. implementation of reforms upward.500 Price (US$/Ounce) 1. As Sri Lanka aspires March 2017. Far affect the Sri Lankan exports adversely.e.000 1.

Low commodity prices which prevailed in the Chapter 02 | World Economic Outlook international markets since 2015. competitiveness and value addition in the export agriculture sector is highly felt at this juncture. increase investments in human capital and maximize the benefits of foreign direct investment. The borrowing at market rates will create burdens in debt servicing and therefore. continuation of fiscal consolidation and implementation of alternative financing methods are essential to create required fiscal space. the concessional financing will shrink within next few years. The need of introducing policies to enhance productivity.MINISTRY OF FINANCE. adversely affected for the agricultural and other exports in 2016 by reducing the export income and reducing the domestic output. SRI LANKA | ANNUAL REPORT 2016 appreciation of US dollar will result in increased debt service payments in rupee terms. 23 . As Sri Lanka is reaching the upper middle income category. The policy makers should be mindful on encouraging sustained economic growth. The appropriate balance between fiscal adjustment and policy formulation is highly recommended.

SRI LANKA | ANNUAL REPORT 2016 Chapter 02 | World Economic Outlook 24 . MINISTRY OF FINANCE.

SRI LANKA | ANNUAL REPORT 2016 Chapter 03 | Macroeconomic Review Macroeconomic Review 03 25 .MINISTRY OF FINANCE.

subdued commodity the slowdown of investment inflows resulted in prices and volatile international financial market a deficit of USD 500 million in the overall Balance conditions contributed to slowing the expected of Payments (BOP) in 2016. GDP per capita prevailed in the first half of 2016 coupled with in terms of USD moderately declined to USD floods occurred in the second half of 2016 3. accommodation and beverages of 5. average inflation. The mining and quarrying The Sri Lankan economy expanded by 4. basis.835 in 2016 from USD 3. Core inflation. capita.8 percent as against the US Dollar. GDP per by the expansion of construction activities. MINISTRY OF FINANCE. economic growth was fueled at end-December 2016 declined to US$ 6. National Consumer Price 26 . the deficit in the BOP mainly reflects external sector.2 Services sector was supported by the expansion percent by end 2015. repayment of Stand- helped reduce government consumption while By Arrangement (SBA) of the International policy tightening measures implemented by Monetary Fund (IMF) and settlement of swap the Central Bank mainly resulted in slowing arrangements etc. on year-on-year of wholesale and retail trade. The subdued have affected the consumption growth in the performance of the exports sector. coupled with economy. Meanwhile. The to 4. SRI LANKA | ANNUAL REPORT 2016 3. Meanwhile. remain resilient amidst risks stemming from the However. increased by 6. the gross official reserves On the demand side. policy reforms implemented earnings from tourism and workers’ remittances over the last two years helped the economy helped cushion the BOP to some extent. rubber and plastic products. The unemployment rate declined the widened current account deficit to US$ 1.363 in 2016. on average.0 percent by end 2016 in comparison to 2. 558. Consequently. as measured by the Colombo On the supply side. Services and Industry Consumer Price Index (CCPI – 2013=100) moved sectors drove the economic growth in 2016. In 2016.3 billion at end of from government infrastructure activities and the 2015. the annual economy. Externally. remained at a moderate financial account amidst sluggish investment level. Agriculture sector declined due to Chapter 03 | Macroeconomic Review year amidst a challenging domestic and external environment.4 percent in 2016 from 4. Industry and Services sector expanded in 2016.7 percent in 2015 and million coupled with modest performance in the inflation. The growth was mainly supported severe weather conditions. The Industry sector measures the underlying inflation of the economy was largely driven by manufacturing sector showed an upward trend. increased by 3. Developments in growth. expenditure on imports and subdued exports Inflation continued to remain at around mid- weakened the net external demand of the single digit level in 2016. flows. However. in nominal terms. The external sector showed mixed performance Demand management policies implemented in 2016 due to uncertainties in the global by the Government and the Central Bank may economic and financial conditions.9 percent Domestically. However.843 in 2015 due to the adversely affected the Agriculture sector while depreciation of exchange rate. despite some volatility led by the manufacture of chemical products. transportation.8 percent in the previous production of gems and other mineral products. prolonged drought condition to Rs.1 Overview and residential properties and public sector construction projects. the rupee depreciated the private consumption. Inflation. Such decline of official reserves can mainly private sector investment in construction projects. be attributed to increased foreign currency However.8 percent in July 2016.0 by the increasing investment demand emanated billion compared to US$ 7. the fiscal consolidation measures debt service payments. Meanwhile. reached 4. which and real estate activities. However. However. The construction an increase of certain international commodity industry regained its momentum supported by prices coupled with upward revisions of certain increased activity in the construction of hotels taxes.942 to 4.5 percent in 2016 after the peak financial services. due to the unfavourable weather conditions.4 percent sector growth was supported by the higher in 2016 compared to 4.

manufacturing sector recorded a based inflation.5 4. Meanwhile.8 percent in 2015.4 9. Meanwhile. respectively. NCPI. GDP (Real) 5.0 5.1 Industry 9.8 27 .1 -0. transportation of goods and passengers including warehousing activities (4.9 percent recorded in 3.5 7.MINISTRY OF FINANCE. in 2015 mainly led by construction (14.4 percent in 2016 compared to 4.5 percent).72 percent.4 percent).2 7.4 percent in 2016.8 11.0 -8.3 percent). The Agriculture sector registered a negative growth of 4. Some notable measures include increasing the Statutory Reserve Ratio (SRR).2 Meanwhile. imposing loan. Chapter 03 | Macroeconomic Review the supply side disruptions. the Industry and the Agriculture sectors contributed to GDP with a share of 26.3 4.1 5. and paddy ( -8.7 percent in 2016 compared increased to 4.7 percent in 2016 by end of 2016 from 5.7 percent.8 percent at end of 2015.6 4. However.1 |Sectoral GDP Growth Rates in 2016 (%) to-value ratio (LTV) and raising policy interest Sector Q1 Q2 Q3 Q4 Annual rates in February 2016.8 7.6 4.4 percent). 9. the year-on-year Agriculture 0.1 2. while its share of GDP remains high at 15.4 -4.4 -10.2 -5.2 Real Economy The Sri Lankan economy grew by 4.8 percent by December 2015. and 364-day to 8.1 March 2017. Agriculture sector contracted in In light of demand-pulled inflationary 2016 due to the decline in production stemming expectations.1 percent recorded NCPI based headline inflation.3 8.7 8.9 percent) increased during the second half of 2016 due to and mining and quarrying (14. the broad money and reserve money recorded a high growth of 18. insurance (8. respectively by end 2016.5 increasing the Treasury bill rates of 91-day.2 percent in 2016 compared to the growth of 4. on an annual average basis.8 percent in 2015 amidst a challenging domestic and external economic environment. 2015.7 -2.4 7.0 percent by December 2016 from to a higher growth of 4. Table 3. Agriculture -0. SRI LANKA | ANNUAL REPORT 2016 Index (NCPI. Meanwhile.0 2.2013=100) based core inflation percent and 7. a tightened monetary policy stance from tea (-11. Industry increased to 6.0 5. rubber (-10.1 percent).6 8. The Services sector remained the highest contributor to GDP with a share of 56. also slower growth of 1.1 2.2 6.1 percent.4 4.4 and 10. 182- day.17 percent.9 9.7 percent) was adopted by the Central Bank during 2016.2 Source: Department of Census and Statistics 3.8 4. respectively. The overall economic growth was particularly supported by the growth of Industry and Services sectors of 6. These developments resulted in Services 6. year-on-year.7 percent.7 percent and 4.3 by commercial banks remained high at 21.5 percent) telecommunication (8.9 per cent by end 2016.2 percent). sector grew significantly by 6.63 percent. wholesale and retail trade (2. compared to mere growth of 2.7 3. respectively in 2016. July 2016 and also in GDP (Nominal) 8.3 percent).6 5.1 7. year-on-year basis. This slowdown was underpinned by the unfavorable weather condition prevailed during the year.2 percent.4 percent and 27.5 growth of credit extended to the private sector Industry 8. Services 3.5 percent of real GDP in 2016 supported by the performance of the financial service activities (12.

tobacco and other non. The paddy 1. With these developments. growth in Agriculture.1 | Quarterly Growth Rates of GDP Chart 3. the extent sown declined percent and 10.4 4. and 7. thousand hectares in 2015. the extent perennial crops. respectively in 2016 compared sectors declined by 11. the share of the Agriculture agriculture share to GDP to 7.000 5.5 3.9 million metric tons whereas activities have recorded negative growth rates 2016 Yala production declined by 21.500 7. to 1.1 percent in 2016 sector to GDP declined to 7. to 4.6 2.9 percent to during the year compared to 2015. paddy yield also declined production and marine and inland fishing sub. growing of of paddy harvested decreased to 1.088 thousand hectares other beverage crops (coffee.5 1. the Government implemented the guaranteed purchasing prices of paddy to curtail the increase Chart 3.2016 the prices of rice. Other Production 8% 16% Fresh Water Perennial 9% Crops Fishing and 3% Fresh Water Rubber Aquaculture 4% 2% Other Spices and Cereals Pharmaceutical 2% Crops Rice 9% 8% Tea 10% Vegetables Oleaginous Fruits 9% Fruits 7% 10% 28 .1 percent.). and cereals sub.3 | Agriculture Sector Composition . Of the total production. forestry and logging. Reflecting the increased taxes Foresty and Fishing and on rice imports.2 percent. 10.0 3. Moreover.000 Chapter 03 | Macroeconomic Review 7.3 percent in 2016 to 4.8 percent in 2015. 7. As a result. animal in 2015.6 to 2015.7 percent. MINISTRY OF FINANCE. most of the major agricultural by 0.114 thousand hectares in 2016 from 1.254 Further. forestry and fishing sector recorded The total national paddy production decreased a negative growth rate of 4.3 % 4. 0.1 5.2 percent while the tea. rubber.2 | Per Capita GDP (US$) 11.000 500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1st Q 2nd Q 3rd Q 4th Q 2015 2016 Agriculture Rice Agriculture. cocoa etc. This had resulted in declining the the year. SRI LANKA | ANNUAL REPORT 2016 Chart 3. Among the sub-activities 2015/16 Maha production marginally increased of Agriculture.011 thousand spices.500 4.000 3692 9. aromatic. sugar cane. Accordingly.1 percent in 2016 from from 7.0 5.5 percent.5 million metric tons.500 971.9 percent to 2.6 2.0 2.0 3.428 kg sectors contributed positively to the overall per hectare in 2015. coconut. the imports of rice substantially Marine Animal Logging Aquaculture declined in 2016.4 million metric tons 4.372 kg per hectare in 2016 from 4. respectively in 2016.8 percent in 2015. Similarly.8 percent growth recorded in 2015 mainly due due to the adverse weather conditions that to adverse weather conditions prevailed during prevailed.2 percent in 2016 from by 8.0 1.0 4.0 percent gross extent harvested dropped by 11.4 2.500 2164 US$ 5. hectares in 2016 from 1. The gross extent sown and sub-sector significantly contracted by 31. drug and pharmaceutical crops.

067 92.696 670.572 15.446 90.676 639.2 -0.483 65.447 201.815 3.075 31.360 51.005 12.405.513 2.5 -3.922 22.943 4. Oil palm) 7 Growing of Tea (Green Leaves) 71.239 30.688 25.072 12.984 139. Foresty and Fishing 569.262 76.9 -0.7 -2.307 13.9 Sewerage.2 12 Animal Production 26.824 4.607 61. except furniture Manufacture of paper products.178 2.127 513.245 1.7 metal products Manufacture of machinery and euipments 27 33.883.521 14.9 Aquaculture Industries 1.380 72.539 885.153 55.321 1.684 13.954 592.839 16.0 -31.372 134.613 191. Waste.245 104.287 1.7 and audio vedio productions 29 .094 929.975 11.8 -4.421 9.307 82.424 64.711 14.438 611.529 96.422 2. 2011 to 2016 Rs.2 34 Wholesale and retail trade 788.7 -4.115 683.7 11 Growing of other perennial crops 14.352 63.769 72.106 641.5 products Manufacture of chemical products and 23 67. and disposal 32 12.7 14.254 2.359 29.244 56.1 7. drug and 9 28.950 51.545 -5.575 97.063 103.1 i.064 38.956 44.355 21.147 44.205 62.846 10.555 41.070 281.591 26.501 13.6 instalation of machinery and equipment Electricity.452 5.441 4.3 17.4 Other manufacturing and repair and 29 34. beverages and 18 487.141 14.4 7.506 929.205 -15.3 -10.416.254 244.623 2.5 wood and cork.5 Cocoa.800 282.822 104.204 87.0 3 Growing of Vegetables 52.978 63.100 184.505 61.554 10.936 519.175 5.473 9.730 8. steam and air conditioning 30 73.927 75.845 32.1 6.218.686 859.3 -2.3 Plant propagation and agricultural 13 8.074 5.319 1.048 848.777 23.6 King Coconut.9 Services 3.201 53.392 131.9 17.044 47.019 76.748 93.112 218.5 15 Marine Fishing and Marine Aquaculture 89.1 6.936 71.269 64.943 507.891 805.0 3.2 7.882 28.671 74.426 50.723 29.249 37.1 4.167 14.435 14.353 -18.969 14.644 75.879 105.1 14.666 15.295 24.e 28 Manufacture of furniture 53.metallic 25 86.5 Chapter 03 | Macroeconomic Review 2 Growing of Rice 70.0 4.2 9.866.560 12.538 1.589 24.9 4. etc) Growing of spices.033 46.7 4.520 -5.100 74.068 4.258 17.7 and reproduction of media products Manufacture of coke and refined petroleum 22 35.287 1.1 -10.052 4.993 68.962 44.4 15.9 6.944 2.842 595.139 26.110 62.391 849. Food and beverage service 37 105.4 non-perennial crops 5 Growing of Fruits 37.4 supply 31 Water collection. SRI LANKA | ANNUAL REPORT 2016 Table 3. tobacco and other 4 2.673 2.1 mineral products Manufacture of basic metals and fabricated 26 26.496 264.522 2.925 24.158 67.481 1.514 28.516 36.1 5.020 1.259 -0.160 126.385 40.7 17 Mining and quarring 148.649 25.618.5 Transportation of goods and passengers 35 745.481 133.6 -13.854 968.982 82.472 25.504 12.734 -11.521 23.681 25.243 82.4 Manufacture of food.090 81.303 85.9 products Manufacture of other non .1 Growing of Sugar cane.5 0.714 55.2 Growing of other beverage crops (Coffee.511 36.023 -10.601 2.065 12.838 44.256 52.604 -2.248 37.187 71. 8 1.142 2. wearing apparel 19 238.092 29.734 73.258 23.289 65.443 611.4 pharmeceutical crops 10 Growing of rubber 45.244 54.aromatic. treatment.1 6.501 4.gas. printing 21 27.311 13.582 81.402 16.511 17.915 -1.7 supporting activities 14 Foresty & Logging 42.7 Growing of Oleaginous Fruits (Coconut.811 55.2 1 Growing of Cereals (except rice) 10.488 82.9 5.461 4.264.738 24.922 67.977 884.406 1.0 activities Programming and broadcasting activities 38 2.183 9.893 -2.080 2.982 13.245.MINISTRY OF FINANCE.960 532.119.298 85.789 80.060 8.6 -11.468 198.087.527 276.441 2.443 55.208 952.0 basic pharmaceutical products Manufacture of rubber and plastic 24 75.2 and leather related products Manufacture of wood and of products of 20 31. treatment and supply 9.1 including warehousing 36 Postal and courier activities 4. Million 2015/2014 2016/2015 Economic Activity 2011 2012 2013 2014(b) 2015(b) 2016(a) Change Change (%) (%) Agriculture.119 6.344 15.252 2.757 553.798 514.623 0. 6 57.421 5.035.711 2.364 4.593 12.968 27.410 7.188 43.300 21.037 78.539 24.888 48.791 38.5 9.656 83.650 30.987 28.605 24.105 9.436 9.858 27.155 4.121 507.6 28.950 4.909 76.2 | Gross Domestic Product (GDP) at Constant (2010) Market Prices.817.276 2.349 51.417 6.505 38.8 activities 33 Construction 424.947 2.056 4.644 4.6 Fresh water fishing Fresh water 16 11.7 -2.9 8.259 1.444 5.849 30.652 5.599 47.4 7.5 Tobacco products Manufacture of textiles.936 6.1 Accomodation.767 10.2 14.450 48.457 28.504 67.1 2.833 57.0 13.

2 compulsory social security 46 Education 136.633.2 12.579 6.8 percent to US$ 1.2 of dwelling 44 Professional services 127.5 million in 2015.011 14. reinsurance and pension 42 67.890 9.476. the earnings natural rubber coupled with the plunge in global from tea exports declined by 5.172 167. Rs.2 percent in 2016.316 803. 473.382 -7.818.579 12. MINISTRY OF FINANCE.901 162.0 of Ribbed Smoked Sheet No. 239.056 6.3 IT programming consultancy and related Chapter 03 | Macroeconomic Review 40 7. This drop was due to the decline in As a result. However.049 489.4 financial service Insurance. Million 2015/2014 2016/2015 Economic Activity 2011 2012 2013 2014(b) 2015(b) 2016(a) Change Change (%) (%) 39 Telecommunication 24. the to a negative growth of 2.5 6.962 9. at basic 6.093 385. in 2016 compared of surgical and other gloves.221 3.633 869.6 percent to Rs.3 percent to US$ commodity prices in 2016.640 881. These developments were to Rs.2 million in 2015 mainly due to growth in exports percent.671 4. The total coconut production percent compared to a contraction of 10.011 709.8 by 3.358 155.2 Gross Domestic Products (GDP). desiccated coconut reduction of a number of tapping days due to production increased by 22.076 369.995 730. The export prices of tea Rs.254.720 7. The tea production in 2016 declined by 11.239 149.6 percent 2016 compared to 3..952.994 173.5 million kg to unfavourable weather conditions prevailed.Residential 47 155.4 -3.098 452.688 386.107 157.28 per kg in 2016 while million kg in 2015 due to inclement weather price of latex rubber declined by 13.6 1.1 percent declined by 1.340.596 69. However.1 (RSS 1) declined percent to 292. 2011 to 2016contd.978 81.420 26.2 4. in The rubber sub-sector continued its contraction 2016 compared to a positive growth of 5.9 5.3 percent in 2016 unfavorable weather conditions prevailed in the due to the high demand for such products which rubber growing areas.6 million kg compared to 328.1 activities Financial Service Activities Auxiliary 41 314.012.826 17.5 care and social work activities 48 Other personal service activities 642.588.355 7.1 8.873.395 30.5 funding Real estate activities.477 173.972 9.667 866. in 2015.056 million nuts in 2015 due to 79. registering a negative growth of 10. Rubber production fell by 10. 1.741 161.642 553. 45 367.1 Public Administration and defense.145.986 34.0 million in 2016 from US$ 1.024 444.707 -8.758 171. mainly due to the decline in global demand for 401.3 Gross Value Added (GVA).450 27.751 159.026 4.144 13.0 percent to conditions prevailed.1 7.5 Human Health Activities.898 146.224 8.429 8.551 147.960 88.1 1. 262.46 per kg in 2015.1 million kg in 2016 from 88.202 8.8 4.5 percent. However. in value added terms. Meanwhile.011 million nuts in in 2015.6 percent recorded in average Colombo Rubber Auction (CRA) prices 2015.009 420.967 10.802 758. coconut oil production dropped global natural rubber prices coupled with the by 7.7 recorded in 2015.5 percent to 3.2 prices (+) Taxes less Subsidies on Products 698. Similarly.4 Constant Market Price Source: Department of Census and Statistics (a) Provisional (b) Revised Tea from rubber exports increased by 25.6 4.026 70.6 in 2016. at 6.517 7.993 10.522 815.1 percent Colombo Tea Auction increased by 17.664 715.269.136.514 839.. in value added terms. the average increased in 2016.846. Coconut and Related Products Rubber The coconut and related products sub-sector contracted by 0.719 417.8 7.6 percent.216 7.506 7.235.0 percent to US$ 33 million in 2016 compared to US$ 26 The tea sub-sector ferther contracted by 11.908 7.15 per kg in 2016 compared to Rs.693 10.3 8.243 8.223 492.854 74. including owenership 43 328.470 402.32 per kg in 2016.678 364.205 430.125 36.486 154.2 | Gross Domestic Product (GDP) at Constant (2010) Market Prices.217 509.963 166.615 382. the earnings 30 .401 7.962 159. with the average prices of the price of natural rubber declined by 30. SRI LANKA | ANNUAL REPORT 2016 Table 3.

compared to 2015.8 drought prevailied in the vegetables growing thousand metric tons in 2015. Meanwhile.7 percent to nearly 174 thousand metric tons. The export earnings from vegetables were production of eggs increased by 8. 64.707 18.155 1. and value added slaughtered animals grew terms. Meanwhile.9 million in 2015.0 percent in 2016 whereas beef production declined in 2016.686 13.213 2.310 7.0 percent to US$ 317.7 percent to 72 thousand metric tons.6 percent to US$ 249.9 percent to 94 thousand metric tons from 81.6 million metric tons in 2016 due to the 14. in 2016 benefiting US$ 366 million in 2016 compared to US$ 352 from the increased production of cinnamon and million in 2015 reflecting the increased volume cardamom.1 coconut.476 21. exports of fruits amounted to 54 thousand metric The production of pork and mutton increased tons.660 28.0 percent of the national milk requirements. fruits and vegetable sub-sector The value-added animal production such as milk.799 13. The imports of dairy products including due to the drop of extent under cultivation of milk powder declined by 0.MINISTRY OF FINANCE. in value added terms. million during the year due to the decrease in demand for such products in the international market.. the average retail price of percent in 2016 compared to a negative growth Chapter 03 | Macroeconomic Review fresh nuts declined by 8.5 percent. Fruits. vegetables by 2. in 2016 compared to 1. Table 3.783 1. the export earnings from of coconut related products such as desiccated spices declined by 16.3 percent However.5 percent to 2.3 percent in 2016 compared to 8. However. production.345 Cardamom 50 87 91 120 4 8 120 779 Clove 6. the export earnings from coconut and pharmaceutical crops sub-sector grew by 6.657 7.4 showed a substantial increase of 4.6 percent to 384 million litres in 10.4 percent to 339 thousand metric tons in 2016 milk. an increase of nearly 20. drugs. the domestic coconut prices comprising of coffee and cocoa expanded by 7.177 18. spices. SRI LANKA | ANNUAL REPORT 2016 has resulted in increasing exports of desiccated Beverage Crops and Spices coconuts by 56.0 percent in 2016 while 5. Meanwhile.829 1.4 percent. 5.549 14. in value added egg. 4. maize. milk powder imports increased by to 1. vegetables moderately increased by 1.190 3.600 17. green gram. The production of This improvement was partly attributable to the cereals such as Kurakkan. declined by Rs.00 per litre to soya beans and black gram etc.798 Sources: Department of Export Agriculture and Sri Lanka Customs (a) Provisional * Including Re-export Cereals.1 percent registered in 2015.960 2. 45. Meanwhile. and coconut cream. prevailed in the country. and Vegetables Animal Production The cereals.000 18.253 1.3 |Minor Export Agricultural Crops: Production and Exports (MT) Production Export * Crop 2013 2014 2015 2016(a) 2013 2014 2015 2016(a) Cinnamon 17.5 percent growth by 6.82 of 18. The domestic milk production growth mainly due to the contraction of cereals by increased by 2.500 17. the production billion in 2016 while chicken production rose by of fruits declined by 6.693 Pepper 28. which meets by 3. the areas.0 percent to percent.879 Cocoa 515 500 457 650 1.652 1. recorded a growth of 1. fresh nuts.1 percent and fruits 2016 compared to the previous year.5 increased.3 such products.0 Rs.545 2.099 911 1.7 percent due to dry weather conditions 42.823 5.379 Nutmeg & Mace 2. This sector showed a slower growth in 2015.467 1. aromatic.1 percent in 2015 due to the increase in per nut in 2016 compared to the previous year. increased farm gate prices by Rs. the production of million compared to US$ 250.3 per cent to Rs. Meanwhile.0 billion in 2016.889 1.00 per litre and enhanced demand for fresh 6.930 16. However.750 4.102 4.945 13.225 5. Due to higher demand arising from coconut The value-added beverage crops sub-sector based industries. 31 .

Mn) Coastal Value Value Shore/ (MT) (MT) Off 2005 29.240 12.077 20.410 384.101 63. gems.930 530.454 7. Further.860 78.401 71. Fishery sector.9 US$ 237.717 7. million in 2016 due to lower export earnings on transport equipment. Manufacturing.901 6.200 36.099 76. The marine fishing sub-sector grew by 0.560 339.830 11.750 535.630 21.5 The Industry sector significantly grew by 6.119 78.710 32. Meanwhile.325 2011 53.440 18.730 97.716 17.985 2006 35.7 percent in 2016 from 3.760 46.310 44.910 512.980 177.536 62. grew moderately by 1. Manufacturing diamonds.729 120.593 2009 41.270 71.320 2015 51. in value added terms.631 2013 52.396 121.300 520.350 61.014 180.110 102.5 percent The export of seafood.350 7.712 34.050 77. and tobacco products by 2.802 17.797 26.046 42.015 18.593 Source: Ministry of Fisheries and Aquatic Resources Development (a) Provisional Industry reflecting the contraction in the manufacturing food.990 54.040 6.3 million in 2016.870 67.410 112.301 7.792 23.982 18.560 444.423 2008 39.266 19.910 2014 53.1 percent to 2.3 metic ton the EU expanded by 23.9 metic ton from 67.740 9. The inland fishing sub-sector by the European Union (EU) on Sri Lankan fish grew by 9.560 49.Mn) (Rs.120 14.810 61. the fishery thousand metic ton compared to 520.681 77.4 |Fishery Sector Performance Operating Fishing Boats by Annual Fish Production by Fishing Sub-sectors Fish Imports & Exports Type (Mt) Marine Fish Total Fish Total Fish Wet Fish for Dry Marine Fishing Inland Fishing Total Fishing Catch Imports Exports Aquaculture or Smoking Crafts (No.2 thousand sector was benefitted from lifting the ban imposed metic ton in 2015.295 16. which accounted for 1.640 150.670 100.920 145. This growth was mainly driven by the to 2.834 18. petroleum products.9 metal products.427 10.714 2010 46. beverages.363 18.850 180.390 30.) Total Fish Year Inland & Deep Sea Quantity Quantity (Rs.128 202.1 percent growth in 2015 with a substantial higher performance of basic metal and fabricated expansion of the construction sector by 14.540 metric in 2015 and the increase in releasing fingerlings tons in 2016.840 146.462 2012 53.020 61. electricity.6 percent in terms of fish increased by 4.020 183.7 percent recorded in 2015. MINISTRY OF FINANCE.) Fleets (No.290 251. mining and quarrying.620 257. the importation of seafood.7 percent in value added terms in 2016 compared to 4.046 24.420 129.380 291.6 million value addition in 2016 compared to a negative in 2016.939 75.590 484.693 26. in 2016 compared in 2015.584 10.289 267.830 73.170 46.9 percent recorded in 2015 32 . including fresh and frozen of the GDP. Table 3.350 162. and jewellery.210 8.191 68.957 21.401 31.920 59.162 80.988 60.620 35.230 18.1 percent to 530. However.521 76.618 274.413 26.492 222.490 319.647 2007 37. Manufacturing sub-sector.6 percent to 457 thousand metic ton in 2016.950 66.560 38. SRI LANKA | ANNUAL REPORT 2016 Marine and Fresh Water Fishing to tanks.134 7.120 93.050 157. rubber and plastic products percent. and machinery and equipment.382 14.524 278.600 43.940.) Production Fleet (No.620 35.690 66.0 percent to US$ 169.830 112.461 2016 (a) 58.190 126.830 163.690 13.540 159.900 7.0 percent to US$ 7.741 9.320 17.013 19.320 109.476 8.172 115. which was the largest sector of the Industry sector. grew by 1.7 percent growth recorded percent.680 67.240 81.450 75.160 182.887 165.876 18.1 Industry sector.360 94. water and waste treatment activities export earnings from industrial goods recorded positively contributed to the growth in the a negative growth of 1.354 269.156 19.988 8.695 15.840 52.411 21.961 86.123 21. The total including fresh fish and dried fish expanded to fish production increased by 2.9 percent mainly due to the rise in exports with effect from June 2016: fish exports to production to 73. Chapter 03 | Macroeconomic Review growth of 2.613 61.

Australia and the United Arab Emirates (UAE) and to the EU market. steam and air higher excise taxes resulted in lower consumer conditioning demand. despite the growth in exports to non-traditional markets. SRI LANKA | ANNUAL REPORT 2016 Chart 3. treatment and 28% Waste.3 per cent to US$ 4.9 percent Scheme of Preferences plus (GSP+) scheme that in 2015. increased marginally by 1. such as Canada.2016 The output of food products such as bakery products.884. the apparel sector will regain its negative growth of 0. 33 . earnings from garment exports was approved by the EU in May 2017. in turn leading to lower production.1 million due to lower demand from the United States of America (USA) market.5 | Performance of the Selected Industrial Exports US$ Mn Item 2011 2012 2013 2014 2015 2016(a) Rubber Products 885 859 888 890 761 768 Rubber Tyres 569 540 551 564 467 476 Surgical Gloves and Other Gloves 181 177 195 176 165 176 Other Rubber Products 135 143 141 150 130 116 Gems. in value added momentum with the resumption of Generalized terms. Quarrying the malt liquor production was disrupted by Chapter 03 | Macroeconomic Review 9% severe floods during Mid-2016 causing the drop in production by 58. prepared meals and animal feed Mining and products contracted during this period.950 2. However.687 2. a contraction was also recorded in tobacco products in 2016.5 percent for 2016.532 2. Boats and Floating Structures 149 57 82 86 182 65 Petroleum Products 553 463 428 338 374 287 o/w Bunkers and Aviation Fuel 524 457 423 327 364 271 Chemical Products 118 117 120 134 126 126 Wood and Paper Products 111 112 116 123 112 117 Leather Travel Goods and Footwear 65 55 77 139 136 166 Plastics and Articles Thereof 55 53 55 67 62 66 Base Metals and Articles 56 56 59 62 56 90 Ceramic Products 38 36 40 41 35 34 Tiles 6 7 8 9 8 7 Tableware. starch and starch Manufacturing 57% products. supply treatment and disposal 0. Household Items and Sanitaryware 28 25 29 29 25 23 Other 5 4 3 3 3 4 Total 2. in 2016 following the growth of 1.5% activities 1% Table 3. gas. Diamonds and Jewellery 532 559 446 394 332 274 Gems 95 118 130 173 164 149 Diamonds 414 417 295 198 148 105 Jewellery 22 24 21 22 19 20 Machinery and Mechanical Appliances 312 297 312 343 294 318 Transport Equipment 225 165 146 152 244 132 o/w Ships.772 2. Moreover. China.4 | Industry Sector Composition . Further.683 2. Higher prices of tobacco products due to Electricity. supply Water Construction collection. Sewerage. dairy products.2 percent.377 Source: Central Bank of Sri Lanka (a) Provisional The wearing apparel sub-sector recorded a Moreover.MINISTRY OF FINANCE.

following the marginal Rubber and Plastic 118.633 396.784 87. Apparel and Leather 365.805 82.748 969.4 increased demand for basic iron and steel Wearing Apparel 124.411 7 14 13 9 Products Wood and Wood Products 27. Fabricated Metal Products except Machinery and 111.2 134. gas.9 131.313 27.2 97. 1 .4 semi-trailers.434 9 10 12 11 Other manufacturing and Repair and Installation of Machinery and 44.6 126.0 82.9 118.5 growth of 0. 28.6 108.6 | Manufacturing Sector Statistics Value Addition (Current Price) Rs. 2 Publishing and Printing Chemical.0 134.294 37.6 126.9 115.6 tyres.831 116. Water and Sewerage Electrical Equipment 107.0 Wood except Furniture increase in local and international demand for Paper and Paper Products 123.4 122.694 41.1 percent growth in electricity generation 34 .261 21.2 131. Gas. Petroleum.1 82.3 77.4 products sub-sector recorded a significant growth Botanical Products of 4.4 Reproduction of Media Refined Petroleum a rapid growth of 14.600 48.5 173.4 126.2 102.7 129.300 35.365 30.724 383.4 The electricity. Meanwhile.947 26.4 112. The Printing and machinery and equipment sub-sector recorded 110.8 72.4 169.584 21. This expansion was reflected (b) Revised by 8.2 products particularly during the latter part of Leather and Related Products 98.3 114. rubber and plastic products Wood and Products of expanded by 17.361 . steam and air-conditioning Overall Industrial Production Index 108.4 112.4 to the expansion of shipbuilding activities.2 145.685 379.995 69.1 106.4 Source: Central Bank of Sri Lanka percent during 2016 following the growth of 5.966 59.1 109. in 2016 compared Beverages 102. Mn.0 86.276 11 5 2 4 Rubber & Plastic Products 74.903 97. SRI LANKA | ANNUAL REPORT 2016 Table 3.6 to 14.7 | Private Sector Industrial Volume Index (2010 = 100) The basic metals and fabricated metal products Description 2013 2014 2015(b) 2016(a) sub-sector recorded a robust growth of 28.669 64.758 46.3 138.0 2015.9 125.879 1 3 .014 38.3 112. MINISTRY OF FINANCE. electrical goods and computers.811 Non-Metallic Mineral Products 124.5 130.9 121.7 Food Products 105. This Products growth was mainly supported by the increase Other Non-metallic 103.1 percent recorded in 2015.4 107.9 percent.1 percent in 2016 with an 83.578 7 10 2 3 Basic Metal Products & Fabricated 34. Textile 128.6 percent growth recorded in 2015 due Tobacco Products 96.9 (a) Provisional percent in 2015.3 97.8 123. Medicinal Chemical and 185.0 paint and varnish products.. detergent and Mineral Products Basic Metals 102.804 Manufacture of Furniture 57.2 88.6 95.4 112. Coal 128. in value added terms.4 111. tubes and other rubber-based products.402 851. Number of Projects Approved by BOI Category 2013 2014 2015(b) 2016(a) 2013 2014 2015(b) 2016(a) Food.5 132.3 103.553 43. Beverages and Tobacco 801. soap.4 92.639 84.954 8 11 6 11 Products Chapter 03 | Macroeconomic Review Textiles.9 Equipment Electricity.0 148.278 56.3 102.6 84.0 in production of fertilizer.3 107.133 96. Products The chemical products and basic pharmaceutical Pharmaceuticals.724 90.0 supply sub-sector continued to expand by 8.9 percent in 2016 due to the 114.002 93.804 95.6 99.8 142.848 Metal Products 4 5 6 6 Machinery and Equipment 34.0 percent in 2016. 3 Paper and Paper Products.897 41.9 149.823 9 10 12 11 Equipment Sources: Department of Census and Statistics and Central Bank of Sri Lanka (a) Provisional (b) Revised Table 3.7 87.3 Products increase in production of motor vehicles and Chemical and Chemical 74.4 86.8 132.1 142.869 858.071 80.6 118.

2 1 Growing of Cereals (except rice) 18.4 -18.1 -10.1 6.6 -11. SRI LANKA | ANNUAL REPORT 2016 during the year.5 2 Growing of Rice -11. credit to the private due to the contraction in non-food consumer sector construction activities increased by 26. Meanwhile.0 13. coal percent compared to 5. Meanwhile. However.9 -14.5 percent growth in 2016 compared Circular highway – phase III and condominium to 5.4 5 Growing of Fruits 1. telecommunication by 8.3 percent.4 7.1 7.4 percent.3 -7.7 sector of sewerage.3 -15.9 3.2 -24.1 16. food and beverages services activities. etc) 2.9 percent in Wholesale and Retail Trade 2016 from 2. This growth was largely attributable to respectively in 2016.1 percent.Aromatic. programming and broadcasting activities by 7. treatment and supply activities by 12. respectively in 2016 and imports of economic conditions in major export markets building material grew by 16. the expansion of accommodation. Table 3. Colombo Outer recorded a 2.3 -10. while the the sector. The sub.3 -2.1 4 Growing of Sugar Cane. gross value the significant expansion in financial service added water collection. port and airport of import trade activities during the year. Reflecting the expansion of private importation of consumer goods declined mainly sector construction activities.1 5.7 -1. and disposal percent.9 IT programming consultancy by 7.0 2.0 percent in 2016 due to the prolonged drought conditions prevailed The Services sector continued to expand by 4. Construction sub-sector regained its momentum with a substantial growth of 14.2 8.4 10 Growing of Rubber -3.7 percent growth in 2016 power generation and fuel–oil power generation and accounted for 56. Tobacco and Other non-perennial Crops 5.7 percent of the Services sector.MINISTRY OF FINANCE. King Coconut.3 9.0 -31. which constructions such as Colombo International accounted for 18.6 7 Growing of Tea (Green Leaves) 0. education service by 7.7 percent contraction in 2015 benefiting from the continuation of large-scale The wholesale and retail trade sub-sector.6 4.8 14. Public sector construction projects largely due to the subdued performance of the in infrastructure development such as road export trade activities and marginal expansions development. percent growth in 2015.8 percent and by 96.9 percent in 2016 8.5 -3.5 -10.7 -14. compared to 4.0 3 Growing of Vegetables -2.Constant (2010) Prices Economic Activity 2012 2013 2014 2015(b) 2016(a) Agriculture.3 -6.1 -2.2 in water catchment areas.1 20.0 25. Consequently.7 35 .3 5. waste treatment.9 goods categories.7 2. the export trade percent in 2016. Further.5 9 Growing of Spices. power projects. insurance activities by activities expanded by 7.7 -2. The development and housing development projects intermediate goods and investment goods provided a substantial impetus to the growth in imports increased during the year.8 percent in 2016 from 24.1 5.2 4. The slowdown was apartments. Drug and Pharmeceutical Crops 57.2 -0.7 6 Growing of Oleagonious Fruits (Coconut.5 the weak global demand reflecting the turbulent percent.5 3.4 percent growth in 2015. Oil Palm) 8. Financial City (port city project). postal and Construction courier activities and public administration services positively contributed to this growth. 2016. the hydropower Services generation contracted by 29.8 | Sectoral Distribution of GDP Growth (%) .1 percent. Cocoa.9 6. and the decline in commodity prices in the world market.8 -4.5 0.8 percent and 29.4 17.5 percent of the GDP in Chapter 03 | Macroeconomic Review grew by 13.2 8 Growing of Other Beverage Crops (Coffee. Foresty and Fishing 3.1 per cent growth in 2015.2 14.5 percent.5 percent and activities grew by 17.0 percent in 2016.2 -2.4 13. The production and imports sub-sector recorded a negative growth due to of cement enhanced by 17.

6 3.8 2.2 7.4 42 Insurance.0 24 Manufacture of Rubber and Plastic Products 10.6 -8.4 6.1 7.0 8.9 17.1 -1.8 4.2 34 Wholesale and Retail Trade 7.6 -2.1 6.7 10.5 48 Other Personal Service Activies 13.0 24.4 -5.8 9.8 4. Compulsory Social Security 5.0 4.2 4.6 5.9 -5.0 38 Programming and Broadcasting Activities and Audio Video Productions 3.4 7.2 -11.1 45 Public Administration and Defence.8 6.6 8.9 24. Wearing Apparel and Leather related Products 2.7 17 Mining and Quarring 24. Printing and Reproduction of Media -10.0 4.4 31 Water Collection.3 Gross Value Added (GVA). Treatment and Disposal Activities 20.3 2.7 39 Telecommunication 8.4 1.2 3.1 2.4 13.7 27 Manufacture of Machinery and Equipment -8.2 14.5 4.5 0.Constant (2010) Prices contd.3 -0.1 14.8 5.0 1.5 23 Manufacture of Chemical Products and Basic Pharmaceutical Products 11.2 8. Residential Care and Social Work Activies 11.3 0.1 6.7 6.5 35 Transport of Goods and Passenger including Warehousing 8. Beverages and Tobacco Products 3.9 17.1 5.7 4.3 8.3 -8.8 8.7 1.0 8.6 5.0 4.6 16 Fresh Water Fishing and Fresh Water Aquaculture 13.8 5.8 7.5 6.2 5. Steam and Air Conditioning Supply 1.5 21 Manufacture of Paper Products.5 7.1 1.9 Services 11.0 -2.4 7.6 Equipment 30 Electricity.6 28.0 13.4 Source : Department of Census and Statistics (a) Provisional (b) Revised 36 .7 -7.0 -0.9 5.5 47 Human Health Activies.6 -13.1 6.2 12 Animal Production 12.3 3.1 26 Manufacture of Basic Metals and Fabricated Metal Products -6.0 4.9 5.6 13.0 2.7 4.3 4.6 1..7 -5.7 1.2 7.7 12.6 -4.3 -12.5 15 Marine Fishing and Marine Aquaculture 8.2 6.9 32 Sewerage.0 3.8 10.3 40 IT Programming Consultancy and Related Activities 10.0 5.4 0.3 -2.0 21.8 4.7 14. Economic Activity 2012 2013 2014 2015(b) 2016(a) 11 Growing of Other Perennial Crops 3.9 Industries 9.4 7.0 4.4 29 Other Manufacturing and Repair and Installation of Machinery and 21.1 8. at Constant Market Price 9.8 33 Construction 21.7 2.2 1.9 5. SRI LANKA | ANNUAL REPORT 2016 Table 3. Gas.3 -5.7 -2..1 37 Accomodation.9 0.2 46 Education 22.1 14.4 9.0 22.0 31.8 0.7 -4.7 Products 22 Manufacture of Coke and Refined Petroleum Products -18.2 12.8 | Sectoral Distribution of GDP Growth (%) .0 6.5 3.3 Chapter 03 | Macroeconomic Review 13 Plant Propagation and Agricultural Supporting Activities 7. MINISTRY OF FINANCE.6 1.6 22.1 36 Postal Courier Activities 9.9 6.1 4.4 18 Manufacture of Food.3 0.4 -3.5 10. Treatment and Supply 7.5 8.3 3.3 17.4 7.8 4.5 10.2 -1.1 4.9 3.9 0.1 41 Financial Service Activities and Auxiliary Financial Services 15.5 0.4 7.6 9.2 9.2 (+) Taxes less Subsidies on Products 2.9 26.0 1.0 4. at basic prices 9.2 Gross Domestic Products (GDP).6 7.8 5.8 4.9 8.8 4.9 4.9 -1. Including Ownership of Dwelling 12.5 19 Manufacture of Textiles. Food and Beverage Service Activities 27.2 4.4 15.7 8.2 44 Professional Services 22.6 4.2 4.1 10.2 12.5 6.1 -6.5 43 Real Estate Activities.6 -5.8 -7.0 4.1 3. Waste.5 9.8 5.1 -0.7 14 Foresty and Logging -10.4 11.9 25 Manufacture of Other Non-metallic Mineral Products 1.5 -15.6 10. except Furniture -25.4 14. Reinsurance and Pension Funding 2.6 1.4 5.6 13.4 5.1 2.5 -1.0 1.0 -7.9 -0.5 21.1 28 Manufacture of Furniture 19.8 4.2 20 Manufacture of Wood and Products of Wood and Cork.9 7.

140 2.2 percent.908 5. The registration of new motor vehicles recorded Table 3. This sub-sector was driven by the improvement of Further.832 Tourist Earnings (US$ Mn) 1.429 20.153 1.981 3.527 32.458 No of Nurses (Government) 30.473 1. respectively recorded in 2015. railways.9 | Selected Indicators of Services Sector Indicator 2013 2014 2015 2016(a) Port Services Vessels Arrived * (c) 4.6 percent and 5.431 77.781 76.499 Financial Sector Bank Branches and Other Outlets 6.380 2.0 percent Airlines increased by 7.1 percent growth in 2016 56.780 105. the number of passenger kilometers capacity with newly commissioned Colombo run by Sri Lanka Transport Board (SLTB) and International Container Terminal (CICT) in Sri private sector increased by 6.272 32.8 percent to 4.805 3.0 Lankan port services.625 1.315 22.644 1. The growth in passenger kilometers operated by the Sri Lanka The transshipments container handled increased Railways (SLR) also slowed down to 0. including Warehousing Particularly.298 4.4 million Twenty Foot in 2016 compared to 8.166 Cellular Phones (No '000) 20.062 1.1 percent and 2.185 5.306 4.887 37 .5 million MT.593 1.760 5.024 4.603 20. the ports increased by 5.611 86. Moreover. respectively in 2016.274.9 percent.2 percent growth and 11.3 percent.3 percent growth recorded Equivalent Container Units (TEUs) while the in 2015.145. to 471.228 Wireless Phone (No '000) 1.735 Transshipment Container ** (TEU '000) 3.799 39.591 6.1 percent by 11.277 19.7 million TEUs per cent in 2016 compared to 0.518 Annual Room Occupancy Rate 71.123 1.292 74.6 percent to 5.055 1.274 3.0 percent.315. respectively.967 4.385 26.672 21. new registration of cars.798. respectively during the year. dual purpose vehicles.781 3.0 percent and 8.123 24. bicycles declined by 57. SRI LANKA | ANNUAL REPORT 2016 Transportation of Goods and Passengers a negative growth of 26.587 1.0 percent growth in 2015.5 74. percent.594 6.431 2.424 in 2016 compared to 655. Chapter 03 | Macroeconomic Review compared to 5.2 percent during 2016.829 No of Doctors (Government) 19.659 Credit Cards in Use 951.7 74.3 74.023 Total Cargo Handled (MT '000) (c) 66. the transport in 2016.023 in airlines and the container traffic and freights.128 1.833 1.546 Total Container Traffic (TEU '000) 4.604(b) 76.628 45.050.MINISTRY OF FINANCE. 31. freight ton kilometers sector was also contracted by a decline in the transported by the SLR and flown by Sri Lankan importation of motor vehicles by 28.487 6.456 26.8 also increased by 10.435 Telecommunication Sector Fixed Telephone Lines*** (No '000) 1.384 Internet and E mail Subscribers ('000) 508 606 683 929 Health Sector Private Hospitals 206 210 221 225 Public Hospitals 603 601 598 598 No of Beds (Government) 79.032.715 2.380 38.5 percent to 5.5 percent to 86. the total passenger kilometers total container traffic and total cargo handling flown by Sri Lankan Airlines increased by 0. the total number of vessels arrived in passenger kilometers run by buses. Meanwhile.527. Meanwhile.915 Registered Finance Companies 48 48 46 46 Registered Leasing Companies 10 8 7 7 Tourism Sector Tourist Arrivals 1.685 Cars 28.086 in 2015.851 4. sector recorded a 4. 2016 benefiting from the expansion of handling Accordingly. three-wheelers and motor The transportation of goods and passenger sub.928 31.945(b) 82.8 Transport Services (New Registrations) Buses 1.172 Dual Purpose Vehicles 24.

6 percent to The ownership of dwelling and real estate sub- 26. of hotels.772 7..4 million in 2015.4 percent resulting in an increase in tourist earnings to US$ in 2016 compared to 17. Moreover.872 5.915 by end of 2016. the room towards improving computer literacy and the occupancy rate marginally increased by 74.8 accessibility throughout the country. percent in 2016 compared to 74. Point Pedro & Karrainagar Ports * Excluding of Sailing craft.128 3. attracting high-end covering financially-untapped areas of the tourists is essential to sustain the tourism sector country. in value added terms. food and beverages sub. Meanwhile. the bank branches and other in Sri Lanka. Central Bank of Sri Lanka (a) Provisional (b) Public and Private (c) Including KKS. The tourist arrivals increased by 14.4 social security sub-sector recorded a positive 38 . Further.070 9.563 Motor Cycles 169. in 2016 Real Estate. compulsory and wireless connections by 6. the internet use and connectivity in 2016 in comparison to 1.5 percent in 2015.Trailers 2.285 Land Vehicles . Myliddy.662 Sources: Sri Lanka Ports Authority. SRI LANKA | ANNUAL REPORT 2016 Table 3.Lorries 5.547 56.1 percent growth recorded in Public Administration 2015.673 79. sector grew by 4.050. The industry is largely This growth was mainly driven by the expansion benefitted by rapid infrastructure development of the banking industry and non-banking and transport facilities such as domestic rail financial institutions with the rapid expansion and air transport.0 percent 2015. Professional Services.977 10. and Beverages million in 2016. and compared to 10.2 percent in 2016 compared to Meanwhile.889 340.6 million public administration and defense.2 million in 2016 from 24.2 percent growth in 2015.1 million in sector recorded an expansion of 4.832 persons with the majority Financial services activities and auxiliary from the Western Europe region. marginally decreased by 2. Food. outlets increased to 6. The telecommunication sub-sector increased by 8.945 Chapter 03 | Macroeconomic Review Land Vehicles .Yatch & Dredgers ** Including Re-Stowing *** Excluding fixed wireless phones Accommodation.129 Three Wheelers 83.1 percent compared to 0.0 percent to 2. supporting efficient tourist of the branch network and other services outlets mobilisation.3 percent in 2015.5 percent in 2016 from 9.Fishing trawlers. Postal.3 percent The accommodation..0 percent to 2.518 million in 2016. 3. Department of Motor Traffic. However. the postal and courier activities sub-sector This could be attributed to the rapid expansion expanded by 5.3 percent.1 percent in the hotel sector with an increase in a number contraction recorded in 2015.315. Further.280 272. Further. Meanwhile. India and China financial services sub-sector grew by 12.9 percent Telecommunication. the fixed line telephone connections 10. guest houses and home stays.9 | Selected Indicators of Services Sector contd. the internet and e-mail subscribers significantly increased by 20.266 2. Further.659 by end of 2016 and usage of credit cards increased by 14.9 percent growth including mobile broadband expanded in 2016 recorded in 2015 despite the continued increase mainly benefiting from the Government policy in the tourism industry. attracting more local and foreign Services tourists.2 percent growth recorded in 2015. Sri Lanka Tourism Development Authority. Ministry of Health & Indigenous Medicine.855 370.121 7. a concept promoted by the Sri Lanka Tourism Development Financial and Auxiliary Financial Authority. and Courier to 1.142 7. This was mainly due to the increase in cellular phone connections by 7. to 4. Telecommunications Regulatory Commission of Sri Lanka.012 2.038 129. MINISTRY OF FINANCE. Indicator 2013 2014 2015 2016(a) Goods Transport Vehicles .Tractors 10.Naval Vessels.0 percent to 1. value-added Activities insurance business activities grew by 8.9 million in 2016 compared to 4.

383 14.004 7. Also. SRI LANKA | ANNUAL REPORT 2016 growth of 5.4 22.6 Export of Goods and Services 2.1 28.0 4.4 Import of Goods and Services 3.) (%) (%) 2014(b) 2015(b) 2016(c) 2014(b) 2015(b) 2016(c) 2014(b) 2015(b) 2016(c) Domestic Demand 11.0 19.2 -1. health in the investment expenditure by 19.6 External Demand = Export of Goods and Services 2.6 Government 869 985 1.0 100 100 Sources: Department of Census and Statistics and Central Bank of Sri Lanka (a) The data is based on the base year 2010 GDP estimates of the Department of Census and Statistics (b) Revised (c) Provisional Table 3. comprising of aggregate activities.3 3.126 3.443 8.6 32.982 7. professional services sub-sector contracted by 3.4 10.5 29. Bn.3 67.3 10.9 3.2 8.5 107.1 Gross Domestic Product 10.301 2. Health.6 Share of Imports in Aggegate Supply (%) 22.3 118.5 129.5 Net External Demand (Trade balance) -837 -825 -904 1.6 percent.2 28.724 5.1 100.662 billion recorded in 2015.5 -7.4 70. However.1 67.5 13.6 10.4 9. creative arts and Rs. care and social work activities grew by 1. This was Services mainly driven by the growth in government The education sub-sector contracted by 7.0 5.4 percent recorded in 2015 with the decline in Chapter 03 | Macroeconomic Review growth of services such as legal and accounting Domestic demand.2 22. respectively coupled with the increase of 8.11 | Aggregate Supply and Use of Goods and Services (a) Rs.022 3.1 -7.8 79.4 -9.7 8.185 2.7 8. compared to 3.3 10.382 14.662 9. Meanwhile.2 percent recorded in 2015. However.019 billion in 2016 from activities such as photography.743 5.1 107. Bn.4 Aggegate Supply 13.10 | Domestic Demand.0 8.1 percent recorded in 2015.2 Private 6.3 28.282 5.2 108.2 8. in percent in 2016.5 29.6 percent in 2015.5 66.1 100.1 21.2 22.3 percent in 2016 compared to a negative growth percent.197 11. increased by 8.6 22.1 29.7 10. other personnel service nominal terms..0 100.198 11.4 10.115 3. consumption and fixed capital formation.6 Investment 3.126 3.952 11.839 8.1 Trade Gap of Goods and Services -837 -825 -904 1.022 3.1 percent.443 3.3 4. expanded by 1.3 percent in 2016 percent growth recorded in 2015.0 21.5 -7.3 21.2 8.6 -8.5 5.3 Domestic Demand and Supply 7.282 5.777 12. and Other Personal remained unchanged at 107.185 2.539 12.MINISTRY OF FINANCE.6 -7.1 5. Growth (%) As a % of GDP 2014(b) 2015(b) 2016(c) 2015(b) 2016(c) 2015(b) 2016(c) Aggegate Demand 13.5 and private consumption by 3.5 Sources: Department of Census and Statistics and Central Bank of Sri Lanka (a) The data is based on the base year 2010 GDP estimates of the Department of Census and Statistics (b) Revised (c) Provisional 39 .839 5. washing and cleaning Table 3.1 76.2 percent in 2016 compared to 6.1 Domestic Demand 11.6 in 2016.015 16.0 Import of Goods and Services 3.348 3.301 2.019 8.2 8.5 128.743 7.1 percent in 2016 compared to a negative growth of 3.677 8.4 31.1 75.2 percent in 2016 compared to 5.0 -7.5 129.0 21.1 percent and 4.5 Total consumption increased by 4.361 10.9 activity etc.2 107.850 8.1 8.952 11. to Rs.6 128.3 21. architectural and engineering activities.078 15.777 12. scientific research and development.361 10.4 9. 8.078 15.6 Consumption 7.1 Domestic Supply = GDP 10. the domestic demand as a percentage of GDP Education.5 107. Supply and Trade Balance (a) Current Market Prices Change As a Percent of GDP Item (Rs. 9.539 5. entertainment activities.

8 Private 2.0 percent in 2015. 904 income from abroad.4 31.Investment Gap recorded a net outflow while foreign investments at the Colombo Stock Exchange (CSE) recorded 3.9 percent in 2016.724 28. Domestic savings to GDP ratio improved to 23. The private savings increased Meanwhile.427 billion in 2016 benefiting from the export of goods and services. However. the domestic savings- Total gross investment accounted for 31.5 Domestic Savings 2.9 percent in 2016 from 26.4 Government -247 -71.2 24.6 percent to Rs.537 2.488.7 -2.5 7.427 26 29 Source: Department of Census and Statistics and Central Bank of Sri Lanka (a) The data is based on the base year 2010 GDP estimates of the Department of Census and Statistics (b) Revised (c) Provisional (d) The difference with the BOP estimates is due to the time lag in compilation.4 percent 904 billion compared to Rs. 2. in 2015.3 -0. 40 . 2008 2009 2010 2011 2012 2013 2014 2015 2016 foreign investments in government securities Savings Investment Domestic Saving . 35 However. MINISTRY OF FINANCE.8 -2.539 billion while declined by 70.820 billion in 2016 from billion in 2015 with the increase of investment Rs. national savings to GDP 3.4 Investment and Savings ratio improved to 28. 3. SRI LANKA | ANNUAL REPORT 2016 Investment expanded by 19. 2. 2. Chart 3.1 national savings. As such.6 Net Factor Income From Abroad -281 -332.0 percent and Government dis-savings increased by 10.290 2.4 percent in 2015.5 investment gap increased by 9.5 | Domestic Savings .290 billion in 2015.851 3. Meanwhile.9 23.8 7. domestic savings increased 3.Domestic Savings Gap 825 903. Bn.724 billion in 2016 compared to Rs. the 20 financial account improved with some notable % of GDP 15 inflows such as proceeds of US$ 1. savings in 2016. As a result.5 percent in 2016 from 28. 3. earnings from tourism and workers’ 30 remittances increased which helped cushion 25 the current account balance.3 percent to Rs. improved by 20. 825 billion in 2015.115 3.2 percent billion in 2016 reflecting subdued performance in to Rs. Overall. increased net current transfers from abroad by 11.820 20. the export of goods and services by 14.9 percent in 2015. Table 3. However.0 billion as at end 2016.7 with a widening of a trade deficit in 2016 from million in 2015.Investment Gap and the increase in import expenditure. the and net foreign private transfers and net factor negative net external balance expanded to Rs.9 National Savings 2. 3. the import of goods and services increased by 10.6 percent to Rs. Meanwhile.115 by 23. receipts from currency swap agreements -5 and long term foreign loans including loans from -10 International Monetary Fund (IMF). consisting of domestic savings percent to Rs. As a % of GDP Item 2015(b) 2016(c) 2015(b) 2016(c) Domestic Investment 3.8 percent in 2016 from 20.2 percent to Rs.6 Investment .12 | Investment and Savings (a) Rs.5 billion from 10 the issuance of the 10th international sovereign 5 bond.443 billion in 2016. This was mainly due to in the construction activities.6 percent. the Balance of Payment (BOP) recorded a deficit of US$ 500 million in Sri Lanka’s external sector remained subdued 2016 improved from a deficit of US$ 1. percent of GDP in 2016 compared to 28. In nominal terms. total the combined effect of growth in private savings investment as a percentage of GDP increased by coupled with a reduction of government dis- Chapter 03 | Macroeconomic Review 31.8 Net Foreign Private Transfers 842 940 7.5 External Sector Developments a net inflow.892 23. Gross official reserves were US$ 2015 as a result of a decline in export earnings 6.7 7.6 -2. Meanwhile.

textiles and textile 25.609 -8.097 7.0 Chart 3.0 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 40 1.398 9.554 11.528 2.935 19.371 7. which is equivalent increased during the period.091 10.8 percent in 2016. and fertilizer.7 | Trade Balance on machinery and equipment.0 billion compared to US$ products. the rupee in import expenditure on motor vehicles.654 2.0 US $ Bn.017 7.710 -9.000 Exports Imports Trade Balance 20 0 The cumulative net outflow of foreign investments US$ Mn.0 articles.262 8.388 -9.287 -8.0 confectionery and medical and pharmaceuticals 15.007 1.228 6.241.5 percent to US$ 19.305 2.182 3.090 Source: Central Bank of Sri Lanka (a) Provisional Earnings from exports declined by 2.198 Unclassified 213 390 162 54 28 14 14 16 13 Trade Deficit -5.713 4. assets owned by deposit-taking corporations food.269 19.546 10.326 Chapter 03 | Macroeconomic Review Industrial Exports 6.578 10. % -20 -40 -1.794 2. Total foreign assets.159 8. The workers’ remittances million in 2016 resulting in the expansion of trade increased by 3.980.853 4.2 months of imports.112 5.000 2015.976 1.565 2.4 billion.7 million while expenditure on 3.836 2.638 9. sugar and 20.400 Consumer Goods 2.2 percent The earnings from tourism enhanced to US$ to US$ 10.870 Investment Goods 2.992 7. Export earnings dropped mainly due to a lower export As at end 2016.019 6.207 13. building material.085 8.000 in government securities amounted to US$ 325 -60 -2.0 0. Growth in Imports (Left Axis) 41 .1 million in 2015.000 -15.758 4.0 were attributable to increase the total import 10.MINISTRY OF FINANCE.090.394 11.981 -3. fuel depreciated against US$ by 3.054 12.111 7.1 million in 2016.093 2.0 (Quarterly) -10. the increase of import expenditure Chart 3. Despite the decline to 5.310 Agricultural Exports 1. which include gross official reserves and foreign export earnings from textiles and garments.626 10.152 4. Meanwhile.388.000 million during the year 2016 compared to a net -80 outflow of US$ 1.190 18.590 4.451 20. 199 7 10 12 15 20 15 Imports 14.581 2.253 4.559 9.6 | Growth in Exports and Imports and Trade Balance -5.4 percent to US$ 9.774 10. 5. beverages and tobacco and coconut exports amounted to US$ 8. Meanwhile.7 percent to US$ 7.319 Intermediate Goods 9.825 -9.003 19.852 2.518. expenditure in 2016.400. tea and spices stemming from the drop 7. petroleum Lanka stood at US$ 6.130 10.0 80 2.5 million in deficit by 8.417 18. compared to US$ 8.274 11.093 million registered during -100 -3.3 billion as at end 2015.7 imports increased by 2.995 3.567 5. the gross official reserves of Sri performance in transport equipment. Item 2008 2009 2010 2011 2012 2013 2014 2015 2016(a) Exports 8. gold.940 Mineral Exports 22 20 24 33 61 52 60 28 29 Unclassified .286 4. .417 -7.1 million in 2015.749 8. SRI LANKA | ANNUAL REPORT 2016 Table 3.481 2. foreign investments at the 11 Mar 12-Mar 13-Mar 14-Mar 15-Mar 16-Mar Sep Sep Sep Sep Sep Sep Colombo Stock Exchange (CSE) recorded a net Trade Balance (Right Axis) Growth in Exports (Left Axis) inflow of US$ 19.13 | External Trade US$ Mn.332 2.476 3.309.122 -4.5 million in 2016 compared to US$ 2. However. in international commodity prices.3 million in 2016 2016 from 2015.

280 1.7 million in 2015.412 1. external sector and the economy.5 billion in 2016. food.340 1.309. .000 into a 3-year arrangement under the Extended Fund Facility (EFF) of US$ 1.2 percent level of exports recorded in 2015 stemming from to US$ 10. 6 10 16 7 9 9 7 8 Latex and Other Crepe .185 1. - Rubber 125 99 173 206 125 71 45 26 33 Sole Crepe . in Sri Lanka. agricultural exports and mineral and average bunkering prices. petroleum products.6 million in 2015.471 1. beverages and with Reserve Bank of India (RBI) worth of and tobacco and coconut exports increased Chapter 03 | Macroeconomic Review US$ 700 million and long term foreign loans significantly. . which account It is expected to improve Sri Lanka’s BOP position for about 77 percent of total exports.272 1.5 Exports million in 2016 from US$ 243.208 Bulk 643 616 567 534 512 561 563 504 473 Packets 321 301 607 667 640 693 754 593 547 Bags 147 156 209 229 203 217 238 183 188 Instant 11 10 13 15 11 15 19 16 17 Green Tea 29 29 44 46 47 56 55 45 44 Other 118 74 .0 per cent to US$ 7.100 million swap arrangement with the Chart 3.491 1.430 1.072 1.111 1.0 million during the year 2016 compared to a net 2008 2009 2010 2011 2012 2013 2014 2015 2016 inflow of US$ 469. .542 1. Export earnings from transport performance in 2016 with the receipts equipment.000 improved with the receipts of the two tranches 4.441 1.3 percent.5 billion with the 10. which Table 3.628 1.546. Transport equipment.9 million in agricultural exports.0 percent. 6. which contributed 2. SRI LANKA | ANNUAL REPORT 2016 The financial account showed a moderate the previous year.9 million compared to US$ 373.383 1. .354 1.8 |Composition of Exports RBI. Meanwhile.1 million in 2016 with increased investments and investor confidence the significant decline in transport equipment with the anticipated structural adjustments in the and petroleum exports. earnings from petroleum due to relatively lower commodity prices in products contracted by 23.000 US$ Mn.14 | Value of Agricultural Exports US$ Mn Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 (a) Tea 1. dropped by and reserve levels in the medium term with the 1.940. dropped by 46. Earnings from industrial 2015 due to the drop in bunkering volume and exports. The financial account further 6. and spices from currency swap agreements with significantly dropped in 2016 while earnings SAARCFINANCE worth of US$ 400 million from textiles and garments.287. . other exports dropped by 1.1 percent. including loans from IMF while settlement of US$ 1.000 loans to the Government increased to US$ 1. 25 63 102 58 38 25 16 18 Sheet Natural 69 46 67 63 38 14 5 2 3 42 .7 million in 2016 compared to the export of a dredger vessel and two cruise US$ 10.000 of EFF amounting to US$ 332 million.000 IMF to support economic reform programme 8. and 9. Meanwhile.3 percent to the total export earnings. Earnings from industrial exports. MINISTRY OF FINANCE.555 1. Long-term 2. Sri Lankan government entered 12. Meanwhile. tea.269 Black Tea 1. Agricultural Industrial Mineral Other Sri Lankan government issued international sovereign bonds worth of US$ 1. This significant drop was mainly due to a higher Earnings from exports contracted by 2.0 percent to US$ 131. respectively in 2016 compared to Earnings from agricultural exports.5 million recorded in 2015 mainly ships.3 percent to US$ international market and reduced volume of 286.

332 2.053 801 813 944 1.191 3. SRI LANKA | ANNUAL REPORT 2016 US$ Mn Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 (a) Latex Natural 17 11 15 8 8 2 2 … 2 Block Rubber 23 2 1 2 1 1 … … … Other 16 10 18 15 14 9 4 2 3 Chapter 03 | Macroeconomic Review Coconut 171 166 166 266 209 205 356 352 366 Kernal Product 82 58 56 136 80 86 214 222 216 Other 89 108 110 130 129 119 142 130 150 Other Agricultural Exports 243 215 335 379 388 529 511 600 489 Seafood 165 171 192 185 198 234 253 163 170 Total 1.940 Sources: Sri Lanka Customs.794 2. dropped by 6.15 | Value of Industrial Exports US$ Mn Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 (a) Textile and Garments 3.Not Available (a) Provisional account for about 23 percent of total exports.992 7. year-on-year basis. export earnings from textiles and uncertainty prevailed in major tea buyers such as Table 3.326. Fruit and Nut Preparations 49 55 51 61 59 63 80 87 100 Cereal Preparations 11 9 11 19 20 25 22 21 19 Fish Preparations 1 1 1 … … … 1 … … Manufactured Tobacco 28 24 26 41 47 49 56 58 73 Other 93 54 85 85 67 61 88 109 105 Other Industrial Exports 686 602 914 1.820 4. Russia and the Middle East.1 million in 2016 from from tea exports declined by 5.112 5. the prices in international market and lower and mace. Department of Trade and Investment Policy and Central Bank of Sri Lanka … Negligible .356 4. especially cinnamon.556 4.261 3. nutmeg. Diamonds and Jewellery 514 402 409 532 559 446 394 332 274 Gems 76 69 70 95 118 130 173 164 149 Cut Diamonds 418 317 322 414 417 295 198 148 105 Jewellery 20 17 17 22 24 21 22 19 20 Machinery and Mechanical Appliances 322 187 259 312 297 312 343 294 318 Food.603 Woven Fabrics 66 55 70 85 92 124 90 101 107 Yarn 44 42 50 57 58 58 68 63 70 Other Made Up Textile Articles 84 44 57 64 56 61 90 100 105 Rubber Products 542 385 558 885 860 888 890 761 768 Rubber Tyres 337 213 336 569 540 551 564 467 476 Surgical Gloves and Other Gloves 117 114 137 181 177 195 176 165 176 Other Rubber Products 88 58 85 135 143 141 150 130 116 Petroleum and Chemical Products 326 208 356 671 580 548 472 500 413 Gems.MINISTRY OF FINANCE.0 million in 2016 compared to US$ in pepper and cloves despite the higher exports 1. Central Bank of Sri Lanka … Negligible --Not Available (a) Provisional 43 .4 million in 2015 due to weaker exports US$ 1. export earnings from spices contracted drop in spices.5 million in 2015 due to the reduction in of other spices.120 3.3 percent to US$ 377.481 2.262 8. to US$ 2.784 4. coconut and tea exports.930 4.986 3.284 3.097 7. Department of Trade and Investment Policy. Earnings by 16.976 1.581 2.326 Sources: Sri Lanka Customs.836 2.306 2. demand emanating from heightened geopolitical Meanwhile. Beverages and Tobacco 244 183 245 348 284 235 289 307 324 Milling Industry Products 62 40 71 142 90 37 43 31 26 Vegetable.003 960 Total 6.371 7.528 2.017 7.884 Garments 3.478 3.228 6.682 4.3 per cent.265 4.269.0 percent to US$ 317.508 4.340.991 4.178 3.749 8.1 million in 2016 with the significant Moreover.

Singapore. the expenditure on consumer goods in 2016.0 million in 2015.1 million in 2016 compared goods increased by 2. Meanwhile.4 percent to US$ 9.2 million in 2015.6 million in 2015 owing to the decline in With the continued expansion in the construction international oil prices despite the increase in sector. However.704. the 2015 owing to a substantial decline in imports of import of medical and pharmaceuticals increased vehicles used for commercial purposes. million in 2016 compared to US$ 4. However. by 14.638.4 per cent to US$ 4. accounting for about 57 percent of total imports.000 articles.2 million in expenditure on investment goods followed by in 2015.5 Meanwhile.000 in global economic conditions and improved trade relations with major trade partners. export earnings from base metals and 20. which import volumes.6 million in 2015 due to the increase million in 2016 compared to US$ 9.8 million in 2015. fuel and fertilizer imports declined in the expenditure on fuel dropped by 8.400.5 percent to US$ 880. vehicles. China and the UAE. Canada. textiles and textile by 17. sugar and expenditure on diamonds.870. MINISTRY OF FINANCE.1 percent 2016.7 million in million in 2016 compared to US$ 930. Import expenditure on machinery and imports contracted by 8. 44 .8 per cent to US$ 5.5 million electrical machinery and equipment increased in 2015. Meanwhile. expenditure on investment goods.359. However. precious stones.6 million compared to US$ 254. Import 2016. and confectionery and medical and pharmaceuticals metal grew substantially by 218.5 percent to US$ 794.7 percent to US$ 373.934. accounted for about 26.8 percent of total imports.0 million in 2016 compared to US$ 2.8 percent to US$ 2.4 million in 2015.0 percent to US$ 1.1 Chart 3.7 million in 2016 by 41.0 equipment including engineering equipment.699.4 million in 2015.296.884. industrial and agricultural 10.1 million in 2015. SRI LANKA | ANNUAL REPORT 2016 garments grew by 1. import of vegetables equipment declined by 5. building material.3 percent to US$ 525.740. This reflects the impact of policy in 2016 compared to US$ 1. Similarly. import expenditure on transport vehicle imports.568.5 percent to US$ 344. expenditure on imports during the review period.2 dropped by 5. measures taken by the Government to discourage However. US$ 1.278. Accordingly.319.4 million in 2016 due to higher gold import expenditure. travel goods and footwear and Chapter 03 | Macroeconomic Review 15. Import of sugar and confectionery increased by 35.8 million in 2016 compared to US$ 459.000 US$ Mn.8 million in 2016 from compared to US$ 2.5 percent to also contributed considerably to the increase in US$ 514. and Japan were the main import origins in 2016. import expenditure on expenditure on intermediate goods. The drop in motor vehicle imports in 2016 by 20. 2008 2009 2010 2011 2012 2013 2014 2015 2016 Consumer Goods Intermediate (non oil) Imports Petroleum Investment Goods The total expenditure on imports increased by 2.352.000 from the USA.3 per cent to US$ 2. leather. The import textiles and textile articles increased significantly of machinery and equipment. the expenditure on intermediate percent to US$ 19.3 percent to US$ 4. India. machinery and mechanical appliances increased in 2016.0 to US$ 18.0 million However.9 | Composition of Imports million in 2016 owing to higher demand arisen 25.198.7 million goods imports.9 million in 2016 articles and gold showed a significant increase in compared to US$ 2.713. China.481. However. In addition. to US$ 2.000 exports showed a revived performance towards the end of 2016 owing to gradual improvements 5. the UAE.6 million recorded in 2015 attributed Expenditure on building material imports mainly to this significant drop in consumer increased by 16.9 million in 2016 from 396. increased by 13.

8 5.5 19.4 49.814 2.16 | Value of Imports US$ Mn.597 2.8 7.6 13.2 148 139 Green Gram 15.9 25.368 1.4 … 0.046 2. Polymer of Ethyline 103 109 99 106 142 147 144 Unmanufactured Tobacco 31 52 71 62 70 83 68 Palm Oil (Refined') 68 161 67 81 123 111 84 45 .0 9.8 36 32 Chilies 44.a.3 122 100 Lentils 129.627 1.795 5.320 1.4 11 13 Fans 12.8 26.1 11.9 18. Accordingly.995 3.1 65.322 1.634 1.398 9.703 Semi Finished Products of Iron 91 157 256 238 168 n.6 0. Category 2010 2011 2012 2013 2014 2015 2016(a) Consumer Goods 2.853 4.9 157. The current account deficit In 2016.0 35. the current account deficit widened as a percentage of GDP increased marginally due to the expansion of trade and primary to 2.033 1. SRI LANKA | ANNUAL REPORT 2016 Current Account of US$ 1.0 51. Chapter 03 | Macroeconomic Review in the services and secondary income accounts.0 25.2 0 1 Oil and Fat 19.154 2.360 795 Home appliences-Radio and Television Sets 45 118 118 103 86 120 136 Rubber Products 72 83 80 88 90 114 112 Medical and Pharmaceutical Products 217 348 372 378 381 460 526 Household and Furniture Items 88 127 117 125 134 150 182 Other 277 530 509 538 632 882 941 Garments 94.9 104.481 Chemical Products 520 702 670 734 808 870 856 Paper and Paper Boards 350 427 363 380 490 477 487 Wheat and Maize 265 429 364 323 405 357 249 Textile 1.7 28.045 4.567 1.6 0.3 158.0 131.219 3.7 15 16 Peas 14.705 Diamond and Presious Metals 378 1.MINISTRY OF FINANCE.1 23.3 59. n.a.713 4.7 9 12 Intermediate Goods 8.4 27.7 134.6 20.328 2.540 1.691 1.700 2.076 588 483 175 162 514 Base Metal 239 354 440 406 478 471 456 Vehicle and Machinery Parts 176 223 211 210 228 264 281 Other Intermediate Goods 1.9 100. Makeup 5.9 35.578 10.9 21.627 Sugar 363 426 345 289 256 253 343 Milk and Milk Products 259 345 307 291 339 251 249 Rice 59 18 24 18 282 135 13 Flour 1 14 5 2 2 2 2 Fish 128 147 134 162 141 218 234 Other Food and Beverages 512 617 489 607 614 768 787 Potatoes 36.425 1.883 million in 2015.0 111.476 3.7 9 14 Gas Cookers 5.0 14.8 68.4 6.0 53 29 Printed Books 19.1 121.3 4 5 Powders.7 22.319 Food and Beverages 1.7 6.4 34 42 Washing Preparations 10.0 86.4 per cent of GDP in 2016 compared to 2.0 59.0 5.086 2.752 1.654 2.812 2.1 6.8 32 26 Chick Peas 17.321 2.6 227.942 million in 2016 compared to US$ 1.692 Vehicles 455 881 495 582 897 1.0 116.5 20.7 33.6 6.2 608.3 income deficits despite the enhanced surpluses percent of GDP in 2015.2 82.266 2.0 79.274 11.9 98 113 132 Other 66.0 68.554 11.0 321 291 Other Articals of Plastices 20.2 13.1 172 169 184 Non-food Consumables 1.3 23.8 8.5 35.4 24.041 4.308 4.0 6. current account recorded a deficit Table 3.087 1.8 15.182 3.638 9.4 515.304 1.4 6.2 20 33 36 Spices 72.0 19.4 112.5 99.616 1.869 Fertilizer 240 407 311 239 272 290 137 Petroleum 3.9 20.0 24 30 Kurakkan 0.6 10.4 46.6 4.3 11.054 12.9 10.296 2.6 77 93 Onions 96.

451 20.538 3. 256 254 252 Other Business Services 188 222 219 245 266 387 275 43 42 42 Government Expenditure n. mainly income accounts of the current account.072 4. . Department of Trade and Investment Policy and Central Bank of Sri Lanka … Negligible --Not Available (a) Provisional Trade deficit expanded due to the increase in triggered by the increase in earnings from tourism import expenditure amidst the drop in export and receipts from workers’ remittances helped earnings in 2016.039 1.417 18.188 1.i. surpluses in the cushion the deficits in the trade and primary services and secondary income accounts.501 1.Not Available (a) Provisional (b) Revised Table 3.237 1.084 3. .i. .603 1. .152 4.172 1.004 1.202 1.e.474 3. 350 380 403 Other Business Services 322 330 319 348 373 464 383 58 63 67 Government Expenditure n.505 3. .e.569 Iron Pipe & Tube 108 85 84 70 56 70 79 Other Investment Goods 4 4 5 6 5 6 8 Unclassified Imports 162 54 28 14 14 16 13 Total Imports 13.076 1.892 2.768 1.065 992 668 707 931 880 Building Material 822 1. However.190 18.518 Communication Services 44 81 80 83 85 109 114 120 128 134 Construction Services 29 40 40 42 43 50 55 58 60 63 Insurance Services 73 68 75 80 91 107 109 115 119 121 Financial Servises . .399 Sources: Sri Lanka Customs.567 5.259 Sources: Central Bank of Sri Lanka .18 | Export of Services (Gross Income) US$ Mn Item 2005 2008 2009 2010 2011 2012 2013 2014 2015(b) 2016(a) Transportation Services 685 1.715 2. Category 2010 2011 2012 2013 2014 2015 2016(a) Investment Goods 2. MINISTRY OF FINANCE.923 2.934 19. .a.685 5.618 Computer and Information Services .003 19.741 Chapter 03 | Macroeconomic Review Recorders and Primary Batteries 87 124 138 152 n.605 6. . 17 17 Medical Instrument and Appliance .278 2.725 4.253 4.198 Machinery and Equipment 1.141 2. . 37 35 35 38 39 51 73 77 79 68 Total 1.352 1.356 2.392 1.397 7. 21 21 19 21 22 27 28 31 31 33 Total 1.339 2. .222 2.784 1.269 19.Caylon Petrolium Corporation. .Used 63 81 87 92 104 117 137 Wire Cables (Electrical) 38 33 32 34 33 37 31 Gas Cylinders (For Industries) 6 12 0 .542 Communication Services 19 55 54 56 57 68 87 98 102 105 Construction Services 6 6 6 6 7 9 26 29 30 29 Insurance Services 34 47 46 50 55 64 85 90 92 89 Financial Servises .431 2.286 4.579 1.263 1.981 3.137 Sources: Central Bank of Sri Lanka (a) Provisional (b) Revised 46 .800 4.462 1.309 1.634 1. . Lanka IOC PLC.17 | Import of Services (Gross Expenditure) US$ Mn Item 2005 2008 2009 2010 2011 2012 2013 2014 2015(b) 2016(a) Transportation Services 470 702 631 817 953 1.590 4.250 Computer and Information Services 82 230 245 265 355 448 604 628 677 724 Travel and Tourism 429 342 350 576 830 1. .000 865 1.758 4. . - Transport Equipment 593 1.382 1. .105 2. . SRI LANKA | ANNUAL REPORT 2016 Table 3. .357 1. . Table 3.162 1. . 281 300 327 337 Travel and Tourism 314 428 411 453 501 710 1.985 2.16 | Value of Imports US$ Mn.131 2.551 2.420 1.

729 arrivals in 2016 followed by China. days in 2016 from 10. Earnings from Tourism Earnings from tourism continued its growth momentum in 2016 with the significant increase in strategic investments in the tourism sector. The upward trend in the professionals decreased by 5.242 million.000 4. The labor accounted for 51.500 6.3 billion by end 2015. in Foreign Direct Investments (FDIs) together with continued foreign debt service payments Chart 3. In 2016 4.5 percent whereas performance of the tourism sector is expected the migration under semi-skilled and unskilled to continue in the coming years with continued categories decreased by 8. net international reserves declined to 8. this compositional The overall BOP in 2016 recorded a deficit of US$ transformation in workers’ remittances is 500 million in 2016 compared to the deficit of US$ largely benefited by continuous efforts taken 1.443 in 2015.3 million in 2015.0 percent to 2. In addition. SRI LANKA | ANNUAL REPORT 2016 Workers’ Remittances per day increased to US$ 168.1 days in 2015. The decline investments in the tourism infrastructure of the in workers’ migration in the unskilled category country with the target to cater to 4. Meanwhile. and France.529 million as at end 2016 from US$ 5.500 imports. social issues.2 moderately by 3.000 US$ 4. The deficit in BOP in 2016 by the Government to discourage migration of can mainly be attributed to a widened current unskilled labour while encouraging semi-skilled account deficit amidst moderate performance in and skilled labour including professionals to the financial account.518 million in 2016 compared to US$ 2.0 percent to US$ 3.798.5 million including housemaids due to the associated tourist arrivals by 2020. workers’ remittances increased of stay per tourist increased marginally to 10.832 persons in 2016 compared to 1. Meanwhile.2 in 2016 compared to US$ 164.0 percent of tourist arrivals migration under skilled category including to Sri Lanka in 2016.500 2.10 | Workers’ Remittances adversely impacted the financial account in 2016.500 5. from US$ 7. which was equivalent to 3. The average spending per tourist 47 .5 billion to strengthen the external sector in Sri Lanka.7 months of US$ Mn. Germany.0 billion by end 2016. The India continued to be the largest tourist origin Chapter 03 | Macroeconomic Review total number of workers migrated for foreign with 356. As such.500 which is a three year arrangement amounting to 2008 2009 2010 2011 2012 2013 2014 2015 2016 US$ 1. increased geopolitical uncertainty in oil-exporting countries in the Middle East Balance of Payments and External followed by the drop in income of such countries Reserves as a result of the decline in oil prices contributed to the decline.500 7.930 in 2016 from 263.050.1 in 2015 while the average duration In 2016. employments declined by 7. compared to US$ 6980.029 7. These five countries 242.000 million as at end 2015.000 (ISB) and the disbursement under IMF’s EFF 1.8 percent.489 million in 2015.7 percent to US$ 7.000 official reserves declined to US$ 6. The tourist arrivals increased by 14.380 persons in 2015.MINISTRY OF FINANCE.000 and issuance of an International Sovereign Bond 2. The increase in tourist arrivals and average tourist spending helped increase earnings from tourism by 18.500 major inflows to BOP included syndicated loan 3. The sluggish performance high-income economies.000 3. 5.981 million in 2015. the gross 6.8 percent to UK.

883 1.130 10.310 Chapter 03 | Macroeconomic Review Imports 10. Standing -6 Deposit Facility Rate (SDFR) and the Standing -8 Lending Facility Rate (SLFR) were increased -10 2008 2009 2010 2011 2012 2013 2014 2015 2016 by 50 basis points to 6.735 -9.930 -1.199 6.985 6.258 -9.536 -2.076 -8.541 -1.167 6.2 -10.361 1.916 Financial Account(c) 2.003 19. Long Term (net) 840 1.742 Direct Investment (net) 384 435 896 871 868 -827 -627 -661 Private Long Term (net) 79 149 175 724 605 Govt.451 20.098 4. 6 Absorbing the excess liquidity in the domestic 4 money market. The CBSL further tightened its monetary policy stance in 3.562 -2.075 -4.259 Income (net ) -488 -617 -647 -1.725 4.796 2.942 Capital Account 233 164 164 130 71 58 46 26 Current and Capital Account 19 -911 -4.50 percentage points % of GDP -2 to 7.434 Receipts (Workers' Remittances) 3.660 4.713 4.227 6.988 -1.5 -14.583 5.064 -1.140 2.985 2.312 -2.392 5. Mn Item 2009 2010 2011 2012 2013 2014 2015(b) 2016(a) Trade Balance -3.800 4.417 18.395 Current Transfers (net) 3.685 5.269 19.314 -1.122 -4.451 -3.3 -2.605 6.615 -3. the CBSL increased its Statutory 2 Reserve Ratio (SRR) by 1.304 Goods.005 3.361 2. Services and Income (net) -3.117 Long Term Capital (net) 1.470 -1.6 Monetary Sector Developments July 2016 by increasing SDFR and SLFR by an The Central Bank of Sri Lanka (CBSL) tightened additional 50 basis points to 7.059 151 985 1.1 -5.5 -2.303 2.400 Service (net) 391 707 1.058 334 790 1.676 750 Allocation of SDRs -6 -2 -5 Errors & Ommisiions 393 -476 -201 Overall Balance (Balance of Payments) 2.072 4.237 992 841 Debt Securities (net) Commercial Bank Long Term (net) Reserve Assets (net) (c) Other Long Term (net) Short Term (net) 1.768 1.825 -9.180 1.242 Payments 403 508 562 646 788 819 814 807 Official Transfers (net) 77 52 60 53 21 28 27 19 Current Account -214 -1.751 -1.219 -4.138 Payments 1.180 -8. With the continuation of 48 .4 -8.4 -11.380 3.927 3.190 18.00 percent and 8.145 5.9 -7.9 -13.084 3.330 4.892 2.559 9.546 10.013 -2.4 -10.4 Source: Central Bank of Sri Lanka (a) Provisional (b) Revised c) Includes additioíl components in the fiíncial account based on BPM 6 new classification from 2012 onwards Chart 3.619 6.184 Receipts 116 323 467 142 132 155 127 120 Payments 603 940 1.501 1.639 6.608 4.2 Current Account Deficit -0.935 19. respectively.774 10.11 | Balance of Payments policy adjustments to curtail the excessive demand pressures in the economy during 2016.50 its monetary policy stance through several percent.489 -500 As a percentage of GDP Trade Deficit -7.085 9.339 5.505 3.116 5.417 -7.643 5.982 -2.388 -9.538 3.287 -8.114 1.4 -2. MINISTRY OF FINANCE.207 13.710 -9.453 Private Transfers(net) 2.939 -2.090 Exports 7.369 -1.5 -1. in February 2016.262 1.215 -8.883 -1.2016 US$.963 2.308 2.980 7.851 -2.374 -8.808 -2.50 percent with effective from 16 January -4 2016.8 -10.8 -3.837 -1.880 2.626 10. SRI LANKA | ANNUAL REPORT 2016 Table 3.609 -8.397 7.099 1.394 11. respectively in response to increasing Other Balance of Payments inflationary pressures in the economy.018 6.00 Current Account Capital and Financial Account percent.19 | Balance of Payments: 2009 .193 6.219 -1.325 2.263 3. Subsequently.407 7.474 3.879 Receipts 1.725 921 -1.50 percent and 8.587 2.

9 19.1 41.8 102.6 15.12 | Reserve Money and Private Sector Credit Growth Fisheries 11.0 27. Tea 68.1 Vegetable.0 1.428. the Average Weighted Call Money Rubber 20.5 217.79 credit in absolute terms was Rs. overdrafts and bills discounted and excludes cash Growth in Private Sector Credit (Left Axis) items in the process of collection Meanwhile.4 2008 2009 2010 2011 2012 2013 2014 2015 2016 o/w Reserve Money Credit to Private Sector Wholesale and 230.20 |Outstanding Loans and Advances Granted by Commercial Banks (a)(b) its monetary policy by increasing SDFR and SLFR Rs. the CBSL again tightened Table 3.205 billion percent at end 2015.0 Industry 1.3 950.7 34. The reflecting the improved financial position of Average Weighted New Lending Rate (AWNLR) certain key public corporations.4 22. 600 Consumer % 10 92. Bn by 25 basis points to 7.0 25.7 Rs.7 11.4 20.4 132. 4.8 Financial and 40 1.3 309.2 3.9 1.0 14.25 percent and 8. the Weighted Average Yield Rates Meanwhile.8 -10 0 Source: Central Bank of Sri Lanka 2014 Jan 2015 Jan 2016 Jan 2011 Jan 2012 Jan 2013 Jan May May May May May May Sep Sep Sep Sep Sep Sep (a) Based on the Quarterly Survey of commercial banks’ loans and advances to the private sector Trade Deficit (Right Axis) (b) Includes loans. the year-on-year growth of credit on 91 days.397. In line with the policy at the elevated level of 18.200 147. on a year- interest rates.7 133.1 85.287. 182 days and 364 days Treasury extended to the private sector by commercial Bills also increased by 227.3 33.3 By end 2016.5 72.2 Advances 800 20 o/w US$ mn. during 2016 compared to an increase of Rs.2 811.0 361.5 4.5 23.42 percent and Coconut 7.75 percent. Bn. As a result.2 o/w 900 40 35 Construction 469.6 Business Services 30 1.MINISTRY OF FINANCE.0 387.37 percent by end 2016 from 10.5 22.5 100 -5 Equipment -10 Services 709. However.1 888.707. Fruits (AWPLR) increased to 11.9 billion in 2015.5 102. mainly due to the expansion in (AWDR) increased by 197 basis points to 8.9 800 700 30 Food and 71. credit obtained by Fixed Deposit Rate (AWFDR) increased by 289 public corporations recorded a declining trend basis points to 10. SRI LANKA | ANNUAL REPORT 2016 inflationary pressures. Private sector increased to 14.118.3 11.1 23.0 Fishing effect are gradually transmitting to the lending o/w and deposit rates of the financial institutions.73 percent in 2016.8 18.3 41. The broad money growth (M2b) remained to end December 2016.6 308. 2016/2015 respectively in March 2017.13 | Private Sector Credit Growth and Trade Deficit Tourism 76.000 Personal Loans and 651.5 17.8 17. short.8 200 Total 2.5 1.766.8 12. 280 and 287 basis banks remained high at 21. % 400 Apperal 10 300 5 Machinery 200 0 and Transport 101.7 82.4 95.9 Retail Trade Chart 3.9 138.8 29.2 26.9 percent by end points.46 percent by end 2016.4 Crops Chart 3. respectively from end December 2015 2016. Average Weighted Deposit Rate on-year basis.0 400 Durables Pawning 172.6 35.17 credit flow to both public and private sectors percent by end 2016 while the Average Weighted at end 2016.6 monthly Average Weighted Prime Lending Rate Paddy 16.6 600 25 Beverages 20 Textiles and 500 15 148.9 159. The sector-wise classification of 49 .2 16.4 13.0 143.4 -0.6 771. and Minor Food 16.4 percent.5 129. Item 2014 2015 2016 % Change term interest rates increased substantially and the Chapter 03 | Macroeconomic Review Agriculture and 287.0 28.0 87. 754.0 Rate (AWCMR) increased to 8.5 198.1 25.9 52.8 639.245.8 273.1 38.

The NCPI. headline inflation. despite Index (2013=100).4 Inflation (Base year . The unemployment rate declined to 4. 25-29 and 30-39 declined to 9. on a year-on-year basis due to the Index and average annual turnover levels.14 | Headline Inflation.6 year-on-year change in National Consumer Price percent in 2016 from 20. respectively in 2016 year. youth 2016 in comparison to 6.2 percent as at end 2016 as in 2015. Food Inflation and Non-Food SL 20 Index declined by 3. on the annual average basis. based on CCPI. As such. unemployment among age groups of in December 2016.8 percent.060 billion at Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 end 2015.275 million whereas foreign purchases declined by 11. performance in 2016 mainly due to the increased NCPI based core inflation also increased to 6. basis continued to remain low at single digit Unemployment rates by education and age with level.8 percent rupee.9 percent and 8. The average turnover -4 -6 declined significantly by 30.1. increased to 4.4 percent and 9. MINISTRY OF FINANCE.7 percent at end 2015. recorded upward trend registered the same rate of 4. measured by the unemployment in the double-digits of 21. the market capitalization 12 10 - 8 fell by 6. percent to 6.625 million in 2016.9 Equity Market Developments based headline inflation.5 points at end 2015.0 percent in April 2017 from 5.7 interest rates and depreciation of Sri Lankan percent at end 2016 compared to 5. 74. The All Share Price Index (ASPI). SRI LANKA | ANNUAL REPORT 2016 credit growth indicates that credit expansion was 3. unemployment continued to be a concern in the labour market with an incidence of youth Meanwhile. 737 -8 billion at end 2016 compared to Rs. 74.6 percent to 7. although there were some upward the exception of youth (15-24 years) declined in pressures during 2016.894. respectively year-on-year change in the CCPI was 4.2 percent.745 billion as at the end 6 4 December 2016 compared to Rs.4 percent in 2016 compared to 4. as measured by the from 6. a low overall unemployment in the country. year-on-year. 2.938 billion as % 2 0 -2 at the end December 2015.8 Unemployment mainly driven by credit to Industry and Services sectors. major stock market index with the performance increased to 6. 2.6 percent to 3.228. 50 . Unemployment among GCE (O/L) and due to the adverse weather conditions and GCE (A/L) and above categories dropped to upward revisions of several taxes during the 5. the impact of tax structure capitalization and net foreign sales declined and increasing commodity prices in international during the year.6 percent to Rs. the ASPI which is the market. market drought condition. The headline inflation.7 percent in 2015 benefiting 3.6 of all companies listed in CSE declined by 9.7 points at 14 end 2015. as measured by the change in the of the decline in unemployment among males Colombo Consumers’ Price Index (CCPI) from 3. the S&P Chart 3. Accordingly.625.4 decreased to 5. S&PSL 20 at end 2015.6 percent to Rs.8 percent registered at end 2015. However.8 percent in 2015.494. This was a combined effect Inflation.5 percent to Rs.3 percent to Rs. on an annual average basis. Core inflation. Meanwhile. Similarly.0 percent to 2. This could be attributed 2016.7 Inflation from the increased employment opportunities Chapter 03 | Macroeconomic Review in the economy.5 percent in 2015.0 percent during the year. at end percent.3 points as at end 2016 compared to 6.3 percent.0 percent as at end 2016 from The stock market activities showed a subdued 3. respectively in 2016.2 percent and 2.7 percent recorded in March 2017. NCPI 3. The cumulative value of foreign sales Headline Inflation Food Inflation Non-Food Inflation declined by 17.9 percent and females (2013=100) annual average and year-on-year from 7.2013) points at end 2016 compared to 3. a macroeconomic indicator.

625 Sources: Colombo Stock Exchange and Central Bank of Sri Lanka *Discontinued in the beginning of 2013 51 .895 6.657 104.214 2. Bn.089 3. SRI LANKA | ANNUAL REPORT 2016 Table 3.092 2.) 110 142 570 546 214 200 341 1.421 74.745 No.503 3.386 6.771 84. Mn) 66.228 Milanka Price Index* 1.913 7.761 68.21 | Movements in the Capital Market Indicators 2008 2009 2010 2011 2012 2013 2014 2015 2016 All Share Price Index (1985=100) 1.426 49.653 83.682 43.210 2.972 60.) 52.229 5. .496 Chapter 03 | Macroeconomic Review Market Capitalization (Rs.060 737 Foreign Sales (Rs.264 4.636 6.854 33.074 5. 3. .275 Foreign Purchases (Rs.631 3.) 489 1.554 89.168 2.626 3.632 43.119 .253 92.Bn. . of Listed Companies in Trading 235 232 242 272 287 289 294 294 295 Annual Average Turnover (Rs.061 5.460 3.MINISTRY OF FINANCE.899 118.085 3.938 2.105 2. .875 72.299 6.793 74.873 83. - S&P SL 20 Index .643 5. .849 7. Mn.

SRI LANKA | ANNUAL REPORT 2016 Chapter 03 | Macroeconomic Review 52 . MINISTRY OF FINANCE.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 04 | Reforms Reforms 04 53 .

• To change the name of the Insurance Board of Sri Lanka as “Insurance Regulatory Commission Special Deposit Account Act: An Act to provide of Sri Lanka” for a special deposit account for foreign nationals to permit foreign exchange into Sri Lanka and • To exempt National Insurance Trust Fund. 43 of 2000. In order to give effect to better management of public finance. The Bureau accesses information only new Goals of the New Government in mind from Licensed Commercial Banks and provides Chapter 04 | Reforms and specifically focusing on addressing issues information only to such Banks to the exclusion related to the maintenance of macroeconomic of a wide range of other users who could benefit stability. matters connected therewith. The final Draft is ready to submit in Parliament. realizing the positive accountability in the use of public resources contribution the private credit information could Government has introduce new mechanisms make to the economy. 18 of 1990 is the only authority empowered to access and provide credit information to lending institutions who are the The Government has identified legal and judicial shareholders of the Bureau and simultaneously reforms to update the laws and procedures to suit to borrowers and prospective borrowers in Sri modern conditions of the 21st Century keeping Lanka. 36 of 1987. simple and predictable including finance companies.2 Reforms in the Investment Promotion Environment Regulation of Insurance Industry (Amendment) Act Land Alienation Act: Required Amendments were brought to the Law to suspended the This is an Act to amend the Regulation of requirement of the payment of lease rentals Insurance Industry Act. be formulated. No. 4. investment essential prerequisite to achieve the economic companies and such other institutions dealing goals of the Government. No. Credit Information Services are provided only by the licensed Commercial Banks • To regularize the Insurance Agents. This Bureau of a general insurance business or long term established under the Credit Information Bureau insurance business. through a system of voluntary membership in • To specify qualifications for the registration the Credit information Bureau. Within this period several The need of credit information has grown proposals for the reform of the law intended to extensively to other areas of finance and business create a more efficient. MINISTRY OF FINANCE. Ministry of Finance has such as Audit Service Commission. SRI LANKA | ANNUAL REPORT 2016 4. National developed a framework based on which the draft Procurement Commission and Right to law titled ‘Credit Information Services Act’ can Information Bill. At present. The upfront as it was considered a significant following proposals are introduced to the impediment to the sustainability of ongoing Amendment. to ensure stronger Parliamentary control over public finance and better In the above circumstances. impediments in the business environment for expansion and growth. businesses while it also increased the cost of entry of foreign investments into the country.1 Overview of Sri Lanka Act No. 54 . Such a system is an companies. with finance and credit at the macro level as well as at the micro level. insurance companies. lapses in the governance structure and from accurate and complete credit information. micro finance legal system for Sri Lanka. and Sri Lanka Insurance Corporation from being listed on stock exchange licensed under Credit Information Services Act the provisions of the Security and Exchange Commission Act.

Chart 4. Like in any emerging economies. absence of coherence in regulatory and operational procedures slowed down the smooth operations of Chapter 04 | Reforms business activities in Sri Lanka.9% Utilities. This has not only hampered the business development of the country. SRI LANKA | ANNUAL REPORT 2016 BOX 4. Foreign Exchange 29. but also has had a negative impact on attracting new investments to Sri Lanka. EODB Unit of Ministry of Finance has conducted five (05) Forums chaired by Hon. 6. 19. plays a key role in the development process of any country.Water.6% related Issues. “getting credit” and “getting electricity”. The report further states that Sri Lanka is still lagging behind in some key areas such as “dealing with construction permits”. The balance queries which are related to policy matters are still in the process of being resolved. 7. it is observed that since its inception.6% Based on World Bank’s latest Ease of Doing Business Index.MINISTRY OF FINANCE. the analysis of the queries based on the subject matter reveals that a majority has been on “revenue related issues”. In the year 2016. By identifying and resolving the regulatory and operational issues. The private sector which is identified as the engine of economic growth.. EODB Unit has received approximately 150 queries and out of which 75% of the queries have already been resolved. etc.2% Licensing. the number of queries submitted to the forums has declined reflecting the improvements in operational efficiencies in the Government sector. Registration and Permit related Issues. followed by on “customs and port related issues” (Chart 1).0% Related Issues. Electricity etc. obtaining cabinet approvals. 55 . 18. In order to address and remove such impediments. compared to Sri Lanka other countries have improved their standards in doing business environment and out spaced us in EODB global ranking in 2017.1|Composition of EODB Queries Other Regulatory related Customs and Ports issues . act amendments. Further. Minister of Finance and other Ministers during the year 2016 and provided “on the spot” solutions to the obstacles faced by the investors and the private sector business community. According to EODB forum statistics. 18.6% Revenue related Issues. EODB forums’ objective is to pave way to improve the global rating in doing business and push Sri Lanka to enter within top 100 in World Bank’s Ease of Doing Business Ranking. issuing of gazette notifications.1 | Ease of Doing Business (EODB) Unit It is common knowledge that economic development cannot be achieved by public sector initiatives alone. as they necessitate strategic level decisions.

Reporting Act. Management Systems of Department of Customs are envisaged to facilitate a broad basing of the Financial Transaction (Amendment) Act. 56 . Enterprises (SBEs). SRI LANKA | ANNUAL REPORT 2016 Sri Lanka Accounting and Auditing Institute of Valuers of Sri Lanka Standards (Amendment) Act (Amendment) Act. • To incorporate provisions to take necessary action for non-submission of financial • Qualifications recognized for admission to statements against Specified Business Membership. Treasury. since there is no such mechanism. Excise Ordinance (Amendment) Act • To introduce proper mechanism to regulate public sector accounting standards. 33 of 1975. • Changes in the grading of Membership. Salient features of Accounting and Auditing (ROSC) we have the proposed amendment are as follows. collect. MINISTRY OF FINANCE. This intends to amend the Excise (Special Provisions) Act to enable the Director General of Customs to levy. recover and refund • To establish a mechanism to receive complaints duties on excisable articles. who should submit their financial statements to the SLAAASMB in • Election Procedure. the scope assigned and names given to similar financial reporting monitoring agencies in • Membership fees other countries. The Ministry of Finance has taken steps to • To introduce provisions to resolve and mitigate introduce new Integrated Treasury Management legal and enforcement issues identified by the Information System (ITMIS) of the General SLAASMB. No. Revenue Administration and Management Information System (RAMIS) of • To introduce penalty as well as on appeal the Inland Revenue Department and Customs procedure to existing Act. terms of the provisions of the current Act. identified the following areas to be incorporated Chapter 04 | Reforms into our Legislation. tax base. The purpose of the Amendment is to strengthen the Financial Intelligence Unit (FIU) to provide legal provisions to combat against Money Laundering and Suppression of Terrorist financing activities. No. 06 of 2006. from the public relating to deficiencies in financial reporting of specified business The introduction of ICT systems: entities and take necessary actions. Based on the findings on a study done by This is an Act to amend the Institute of Valuers of the World Bank on Observations and Codes Sri Lanka Act. • To change the name of SLAASMB in line with • Code of Professional Ethics for members. It is at final Draft stage. while ensuring better coordination and interfacing with each other and the system of An Act to amend the Financial Transactions other respective Government entities.

monthly data from Provincial Councils is being collected by the MOF and a proper mechanism for collecting financial data of Local Authorities is being planned to develop in due course. The analytical framework of the new manual includes nonmonetary transactions. The Committee has taken several measures to extend the institutional coverage of the government and is in the process of compiling Extra-budgetary units as government entities. A GFS Coordinating Committee comprising the contributing departments of the MOF and CBSL has been established to facilitate the compilation of GFS. Compiled Government Finance Statistics are mainly presented by the Statement of Government Operation. Ministry of Finance (MOF) and the Central Bank of Sri Lanka (CBSL) are in the process of migrating to the Government Finance Statistics Manual 2001 (GFSM 2001) and its update (GFSM 2014) for the purpose of preparing Government Finance Statistics. the Statement of Other Economic Flows.2 |Government Finance Statistics (GFS) Government Finance Statistics (GFS) are a basis for fiscal analysis. GFSM provides economic and statistical reporting principles to be used in compiling the statistics and describes guidelines for presenting fiscal statistics within an analytical framework. and they play a vital role in developing and monitoring sound fiscal programs and in conducting surveillance of economic policies. Major changes can be seen in institutional coverage which is defined in unit basis in the new manual instead of functional basis of the government. 57 . The new manual contains a substantial modernization and expansion of the system described in the 1986 GFSM. Flows recorded on the accrual basis automatically captures past-due obligations. Transforming Extra-budgetary final accounts of three years in to the GFSM 2001/2014 formats is in progress with the sentiment of disseminating GFS time series for three years. With the aim of improving the institutional coverage further. GFSM 2001 and its update GFSM 2014 provide guidance for a precise calculation of surplus or deficit (net lending/borrowing or overall balance) which helps to identify economic issues of a country and the high quality statistics generated are internationally comparable across countries. the Statement of Sources and Uses of Cash and the Balance Sheet and published annually in the GFS Yearbook. With the intention of gaining the above advantages and strengthening the capacity to formulate fiscal policy and monitoring fiscal developments. flows other than transactions and balance sheets. SRI LANKA | ANNUAL REPORT 2016 Box 4. from currently used GFSM 1986. GFS preparation methodology has been introduced by the Statistics Chapter 04 | Reforms Department of International Monetary Fund (IMF) by issuing the 1986 Government Finance Statistics Manual (GFSM)1. In order to strengthen the worldwide effort to improve public sector reporting and transparency IMF introduced a new Manual in 2001 clarifying the standards for compiling and presenting fiscal statistics. Technical Assistance (TA) Missions of the IMF visited the country several times and as a result officers are capable to compile Government Finance Statistics (GFS) for the Budgetary Central Government using accounting records as the main source data.MINISTRY OF FINANCE. 1. In facilitating these developments.

SRI LANKA | ANNUAL REPORT 2016 Box 4. MINISTRY OF FINANCE. Ministry of Finance Integrated Treasury Management Information System (ITMIS) has been the most important initiative envisioned to simplify the current business processes of the Ministry of Finance while automating internal business processes and workflows to a great extent. talent engagement. showing varied levels of maturity in their digital transformation of their processes. Government agencies in Sri Lanka being rather late adopters of the digital technology are no exception. In fact RAMIS has been a great step towards creating a more efficient and an 58 . The latest version of ASYCUDA. treasury and cash management and to support the government in the preparation of financial statements. and citizen service models. It intends to implement a comprehensive reporting and analysis of framework to support Ministry of Finance in effective planning and monitoring of Government finances. Sri Lanka Customs has been striving hard to take more citizen centric digitization initiatives fulfilling their commitments under World Trade Organization’s Trade Facilitation Agreement. The term embraces new types of innovation and creativity in any given domain. ASYCUDA World allows connectivity with other Government Agencies paving way to implement important initiatives such as Single Window. as well. It is true that transforming government through the power of digital technologies will be a long journey and government agencies worldwide are at different stages in this journey. accounting for public expenditure and revenues. At present all the declaration submission has been brought completely online while all the payments are made through online e-Payment mechanism. ASYCUDA system itself evolved from a legacy system to an open standard system while embracing all other functions of a modern Customs Administration such as trade facilitation through risk management based on accumulated intelligence within the system. The key functions of the Ministry of Finance and spending units that are proposed to be digitized with the implementation of ITMIS include budget preparation budget execution.3 |Digital Transformation in the Government Sector Background The term Digital transformation has a wider meaning than merely enhancing and supporting Chapter 04 | Reforms traditional methods. Inland Revenue Department The Department of Inland Revenue (IRD) envisioned to achieve their digitization objectives by implementing the Revenue Administration and Management Information System (RAMIS). Sri Lanka Customs Sri Lanka Customs started their automation in early as 1993 with the implementation of ASYCUDA for Customs Declaration Processing.

The biggest information system tender for the National Digital Identity (NDI) which is expected to be budgeted over $ 100 million is being processed. directions and clearances etc. Details of any kind of registered vehicle and the ongoing registration number can be enquired through the system. All the documents submitted with the applications for the passports are scanned only digital images which are retained while returning all the documents submitted along with the application itself. Chapter 04 | Reforms Digital Initiatives of Other Government Entities Department of Immigration & Emigration has started their online Electronic Travel Authorization (ETA) system in 2012 and it has been helped foreigners immensely in obtaining their visit visa to Sri Lanka prior to the arrival. The NDI will ensure that every citizen will have an NFC (Near Field Communication) card with a cryptographic private key embedded in it. This is mandatory for all employers who have more than fifty employees as an ICT solution consolidating the EPF and ETF Trust Funds related services to offer efficient services to stakeholder organizations. appeals. Every citizen from birth will have a 59 . Vehicle owners of the Western Province can apply for the revenue license online and do the payments from credit cards through the Office of the Provincial Commissioner of Motor Traffic web site (eRevenue License). Future of Digital Transformation of the Government Sector in Sri Lanka Present Government has shown its’ commitment towards digitization in many ways assuring protection for ongoing digital transformations as a whole. online filing of tax returns. Department of Pensions has taken steps to automate the registration of pensioners through the Pension Management System which facilitates the pensioners to be registered online and obtain an auto generated pension number. Department of Motor Traffic has introduced an e-service for motor vehicles. Paper based photographs are not required for passports since only the digital photograph should be submitted through one of the authorized photo studios located island-wide for the purpose. The department has been receiving Advance Passenger Information for some time and steps are being taken to start Advance Passenger Processing to prevent unwanted passengers from boarding aircrafts destined to Sri Lanka at the origin port itself. This card will enable every citizen to do secure transactions. cancellation.MINISTRY OF FINANCE. collections. tax payments. EPF e-return system of Central Bank of Sri Lanka refers to a method of sending employees contribution details and payments electronically. SRI LANKA | ANNUAL REPORT 2016 accountable tax environment in the economy while automating tax administration processes of the Department. At different stages of the process pensioners will be informed via a text message (SMS). The design of RAMIS is expected to facilitate a number of web based services such as registration.

An electronic Document Attesting System (eDAS) at the Ministry of Foreign Affairs will provide citizens with the facility of getting their certificates attested and certified within five to fifteen minutes by simply accessing one single counter at the ministry’s consular division under a new electronic system. 60 . SRI LANKA | ANNUAL REPORT 2016 digital wallet and this would mean that every citizen will be able to transact online. MINISTRY OF FINANCE. The Government has taken steps to grant connectivity to the World with Google Loon Project which articulates providing a 4G LTE network to the whole country. reducing inefficiency and cost under this initiative. in order to identify persons for the purpose of facilitating the general public to obtain their day to day services and facilitating national security and accelerated economic development of the country. Under this project it is intended to establish a national persons registry as a database with bio data of persons of 15 years or above. This project is formulated to facilitate the general public an efficient and quality service through an identity card issued an e – NIC with modern technological security features. The Government is also looking at introducing software coding to local schools and Chapter 04 | Reforms empowering every student from Grade 9 onwards with a tablet computer while planning digitally equipped 100 schools implementing digital classrooms as a pilot project. The Department for Registration of Persons has initiated an e-NIC Project. Digital documents can be digitally signed and dispatched digitally to Government institutions. fingerprints as biometrics and a photograph taken according to ICAO standards and issue an e-NIC during a specific time period for the persons completing the eligible age. Sri Lanka is moving towards a smooth digital transformation and benefit from the merits of it through timely adoptions and proper monitoring of novel technologies.

01-01-2016 DMA/2016/01 Departments. Salary Advances and pensions for the year 2017 09-09-2016 TOD-2015-05(i) Advance the Date of Pension payment for the month of October 2016 31-05-2016 04/2016 Revenue Estimates for year 2017 31-05-2016 03/2016 Statement of Arrears of Revenue-30/06/2016 28-01-2016 TOD-01-2016 Payment of the Monthly Salary of Government Servants Department of State Accounts Circulars Transmission of Accounting Data Through Monthly Summaries of Accounts to 27-12-2016 253/2016 the Department of State Accounts during the year 2017 22-12-2016 254/2016 Revenue Accounts of the Year 2016 09-12-2016 252/2016 Appropriation Accounts-2016 17-10-2016 251/2016 Closing of Accounts for the Financial Year -2016 03-08-2016 250/2016(i) Accounting Third Party Advance Payment - 11-04-2016 SAD-249-2016 Treasury General Deposit Accounts 06-01-2016 248/2016 Accounting the Value Added Tax Department of Management Audit Circulars Appointment of Internal Auditors for Development Projects Funded by Foreign 10-06-2016 DMA-2016-02 Financing 28-01-2016 DMA/2009/(I)(i) Guidelines for Internal Auditing Maintaining a Database for vehicles owned by Government Ministries. SRI LANKA | ANNUAL REPORT 2016 Box 4. Boards.Tamil Budget Call 2017 Guidelines and Directions for the Preparations of Annual 02-08-2016 NBC-2016-02 Budget Estimates 2017 31-07-2016 NBC-136E 2008 . Corporations.MINISTRY OF FINANCE.4 |Circulars Issued by the Ministry of Finance – 2016 Date Circular No Subject Ministry of Finance 17-10-2016 02/2016 Establishment of Procurement Monitoring Unit(PMU) at Ministry of Finance 26-04-2016 01/2016 Establishment of Procurement Monitoring Unit(PMU) at Ministry of Finance Department of National Budget Circulars Chapter 04 | Reforms Guidelines to grant Compensation for the fishermen who died while engaging in 30-12-2016 04/2017 fisheries activities in an Emergency Disaster Situation Guidelines for provision of Relief to the disaster victims in an Emergency 30-12-2016 03/2017 Disaster situation and Public evacuated from their residencies due to disaster risk and Restoration of Damaged Areas Guidelines to grant Compensation for the fishermen who died while engaging in 30-12-2016 04/2016 fisheries activities in an Emergency Disaster Situation Authorization of Expenditure and Public Expenditure Management -2017 28-12-2016 05/2016 Budget Guidelines for procurement of vehicles Government Agencies under the 19-09-2016 1/2016(i) operational Leasing Method .Guidelines on Accounting Guidelines for Procurement of Vehicles for Government Agencies under the 17-03-2016 NBC-2016-01 Operational Leasing Method Monitoring of Financial Physical Performance of Activities Financed by the 11-01-2016 NBC-2015-06(I) National Budget Department of Management Services Circulars 16-12-2016 01/2016 (I) Cadre and Remuneration Management of Projects DMS Circular No 24-03-2016 Cadre and Remuneration Management of Projects 01/2016 Department of Treasury Operation Circulars 09-12-2016 09/2016 Statement of Arrears of Revenue Collection of Information for the determination of annual imprest limit to each 01-12-2016 08/2016 Department for the Payments under the budgetary provisions provided in the Appropriation Act of 2017 18-11-2016 07/2016 Closing of Cash Books for 2016 and Settlement of Imprest Accounts 20-10-2016 6/2016 Maintaining Idle Cash Balance in the Government Official Bank Accounts 15-09-2016 TOD-2016-05 Payment of Salaries.Budget Call 2007-07-25- 28-06-2016 NBC-130E Grant of Property Loans Through Banks . all other Government Institutions and Projects 61 .

Collection.01/2016 Audit of State owned Companies(SOCs) Public Finance Department Circulars Procurement of Works up to Rs.03/2016 Deduction of PAYE Tax from the employees of State owned Enterprises (SOE) Voluntary Retirement Scheme (VRS) for Excess Employees of Government 08-03-2016 PED-02/2016 Owned Voluntary Retirement Scheme (VRS) for Excess Employees of Government 07-03-2016 PED-02/2016 Owned 01-01-2016 PED.4 |Circulars Issued by the Ministry of Finance – 2016 Date Circular No Subject Department of Trade and Investment Policy Circulars 14-07-2016 01/2016 Issuing Motor Vehicle Permits on Concessionary Terms 21-10-2016 01/2016(I) Issuing Motor Vehicle Permits on Concessionary Terms Chapter 04 | Reforms Department of Fiscal Policy Guidelines on Estimations .50 Million from Regional Contractors under 31-03-2016 04/2016 Domestic Funds Circular Letter Reservation of Import Cargo for the Ceylon Shipping Corporation Limited 19-02-2016 No: 03 (CSCL) 18-02-2016 03/2016 Settlement of Outstanding Contract Commitments 16-02-2016 431(1) Purchase of airline tickets to travel abroad 15-02-2016 02/2016 Amendment of FR. iy jHjia:dms. Monitoring & Reporting of Government 30-12-2016 01/2015(V) Revenue Guideline on Estimation. fkdjk wruqo.50 Million from Regional Contractors Under 30-09-2016 04/2016 (i) Domestic Funds jHjia:dms. Collection. 108 Under Financial Regulation 1992 08-01-2016 01/2016 Payment of Fees for Urgent Services to Government 62 . Monitoring & Reporting of Government 15-02-2016 01/2015(II) Revenue 14-01-2016 01/2010(ii) Transfer of Nation Building Tax (NBT) Revenue to the Provincial Councils Department of Public Enterprises Circulars Payment of Bonus to Staff of Government Corporations and fully Government 16-12-2016 PED 05/2016 owned Companies for year 2016 Transport facilities for officers in Commercial Corporations.dapkh lsÍu ) 2016 whjeh 29-07-2016 PFD-2016-07S. Collection. Statutory Boards 26-10-2016 PED 1/2015(I) and State Owned Companies Guidelines for Procurement of Vehicles for Government Agencies under the 19-10-2016 PED 4/2106(i) Operating Leasing Method Guidelines for Procurement of Vehicles for Government Agencies under the 30-05-2016 2016/04 Operating Lease Method 29-04-2016 PED. Monitoring & Reporting of Government 9-01-2017 01/2015(V1) Revenue Guidelines on Estimations . MINISTRY OF FINANCE.pdf fhdackd 17-06-2016 06/2016 Revision of Non-Refundable Tender Deposits 31-03-2016 05/2016 Annual Board of Survey Procurement of Works up to Rs. SRI LANKA | ANNUAL REPORT 2016 Box 4. Collection.a iudf. Monitoring & Reporting of Government 16-03-2016 01/2015(III) Revenue Guideline on Estimation.

Sri Lanka. 63 .5 | International Trade Agreements Sri Lanka has been actively engaged in Bilateral. Plurilateral and Multilateral trade negotiations and has been undertaking trade reforms in line with the WTO’s GATT principles and guidelines. the APTA Council of Ministers was requested to amend the APTA protocol to include Mongolia as a member of the APTA and also to revise the National List of Concessions to implement the fourth round of concessions and the rules of origin as agreed. There were effective negotiations and implementations of Bilateral. By end of 2016. both countries have completed its phasing out commitments under the Tariff Liberalization Programme and now have the duty free market access for more than 4500 products in both countries. • India . Plurilateral Chapter 04 | Reforms and Multilateral Trade Agreements.Sri Lanka Free Trade Agreement (PSFTA) • South Asian Free Trade Agreement (SAFTA) • Asia-Pacific Trade Agreement (APTA) • Bay of Bengal Initiatives on Multi . Sri Lanka has submitted a dossier consisting of all non-tariff barriers. proposed to begin the implementation of their Tariff Liberalization Programme as per HS 2017 version and the BIMSTEC Secretariat has planned to give effect to the proposed tariff liberalization programme in 2017. Plurilateral Free Trade Agreements to which. in 2016. SRI LANKA | ANNUAL REPORT 2016 Box 4.MINISTRY OF FINANCE. Under PSFTA. At the forty-nine sessions of the APTA. It is further noted that member states of the BIMSTEC have. Sri Lanka is a party are in operation. By end of 2016. At the BIMSTEC. the implementation of the Trade Liberalization Programme has not taken place in 2016 due to the non-completion of the internal procedures of some member states. However. encountered by the Sri Lankan exporters to India under the ISFTA for solutions. it was decided to finalize the implementation of its Tariff Liberalization Programme as per the transposition of schedule of commitments from HS 2007 version to HS 2012 version at 6 digit level. following Bilateral. In 2016. there were four rounds of FTA negotiations with China and three rounds of negotiations with Singapore were completed. at present.Sectoral Technical and Economic Cooperation Agreement (BIMSTEC) – Free Trade Agreement The ISFTA and the PSFTA aim at promoting economic linkages bilaterally through enhancement of bilateral trade and investment. held in August 2016. has continued with bilateral negotiations on the proposed Free Trade Agreement with China and Singapore and the proposed Economic and Technology Cooperation Agreement with India.Sri Lanka Free Trade Agreement (ISFTA) • Pakistan .

trade in services (identified services). investment. SRI LANKA | ANNUAL REPORT 2016 The scope of the proposed FTA between Sri Lanka and China as well as Sri Lanka and Singapore will cover trade in goods. Turkey. B and C and already deposited to the WTO. Russian Federation and Iran. During 2016. trade in services (identified services) cooperation on Sanitary and Phytosanitary measures. two rounds of negotiations on the proposed Economic and Technology Cooperation Agreement (ETCA) with India were completed. Sri Lanka has also finalized the text of Agreement on Co-operation and mutual assistance in Customs matters with countries such as the United Arab Emirates. economic and technological cooperation. It is also proposed to conclude the FTA with China and Singapore by end of 2017. Customs Cooperation and Trade Facilitation Sri Lanka has finalized its implementation schedule of the WTO Trade Facilitation Agreement with the classification of categories of A. Sri Lanka has explored technical assistance from the International Trade Centre and the World Bank for implementation of its commitments to the WTO Trade Facilitation Agreement. The WTO Trade Facilitation Agreement will come into effect in early 2017. 64 . investment cooperation on Customs procedures and trade facilitation and economic and technical cooperation. Chapter 04 | Reforms The proposed Agreement with India will cover trade in goods (incorporation of Indo-Sri Lanka Free Trade Agreement). MINISTRY OF FINANCE. Customs cooperation and trade facilitation.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 05 | Fiscal Developments Fiscal Developments 05 65 .

the end of 2016 from 77.2 percent to Rs. and 23. 2016 with the aim of containing the budget Government tax revenue to GDP ratio remained deficit thereby curtailing the Government debt Chapter 05 | Fiscal Developments at 12.1 Overview surpluses in 2017 and beyond implying the impact of envisaged revenue and expenditure The fiscal consolidation process continued in based reforms.2 percent in 2016 from billion in 2016 mainly due to the decline in vehicle 13. also showed improved performance in 2016. the Government revenue to GDP vehicles declined by 29. The deficit was to Rs. the Government revenue is expected to However.8 base.9 billion in 2015.5 percent of GDP while the public declined in 2016 due to the reduction of revenue investment is expected to maintain at above from corporate and non-corporate income taxes 5. However. 1.6 percent. rationalizing percent mainly due to the increase in VAT rate tax exemptions and strengthening the tax to 15 percent from 11 percent. 186.6 percent of GDP at the end of 2015 due to a lower growth in nominal Revenue collected from domestic consumption- GDP and depreciation of the rupee. 1. 1.686. monitoring (RAMIS) at Inland Revenue Department (IRD). spending commitments. Revenue from Pay-As- and primary balances are expected to maintain 66 . the Government of the tax base by removing VAT exemptions implemented various policy measures to and increased compliance through the initiation rationalize expenditure in terms of improving of Revenue Management Information System efficiency of welfare expenditure. the broadening administration. Accordingly.4 percent to Rs. 420.9 a percent of GDP increased to 79.5 percent of GDP by 2020. System (ITMIS) and improved financial discipline 11. Revenue Medium Term Fiscal Strategy of the Government generated from PAL.8 percent to Rs.9 percent to Rs. the current and withholding taxes. simplifying the tax system. several measures were taken to reverse increased by 20.454. commencement of Similarly. the issuance of International Sovereign Bonds 222. cigarettes and Integrated Treasury Management Information petroleum products increased by 14. the Government Levy (PAL) increased marginally by 4.5 ratio increased to 14. Special Commodity Levy envisages the gradual reduction of the budget (SCL).3 percent in 2015 mainly due to sustaining imports stemming from the introduction of the the tax revenue and enhanced non-tax revenue unit rate in calculating excise duty in November emanating from profits and dividend transfers 2015. Accordingly. SRI LANKA | ANNUAL REPORT 2016 5. The reforms implemented (ISBs) and a Foreign Currency Term Financing by the Government helped increase the non-tax Facility (FTFF). from increased revenue mobilization and the The total tax revenue increased by 8. MINISTRY OF FINANCE. the total revenue the budget deficit was reduced to 5. Government debt as revenue to 1. The revenue from excise duty on motor Accordingly.3 percent.8 billion.463. The revenue generated from Government revenue through broadening the tax both domestic and import VAT increased by 28.0 billion in 2016 the declining trend in Government revenue while import-based taxes such as import duties. the increase in the unit rate of excise duty by the SOBEs. In 2015 and and taxes on liquor and cigarettes significantly 2016. Similarly.0 percent. despite based taxes such as VAT on domestic activities lower net borrowings during 2016.7 billion while total non-tax revenue financed mainly through foreign sources with significantly increased by 124.0 percent decline in expenditure growth.4 percent of increased by 15. 2016. excise taxes on liquor.6 percent of GDP in 2015 benefiting in 2016 compared to Rs.9 percent implemented several tax reforms to augment the to Rs. revenue collection from income taxes increase to 16. to GDP ratio while rationalizing Government VAT on imports. In nominal terms. in 2015. respectively in of State Owned Business Enterprises (SOBEs).3 percent at percent in 2015. 738.3 percent of GDP. Furthermore.9 percent of GDP in 2016 from 0. Ports and Airports Development expenditure.4 billion in 2016.4 percent sustaining the improved level accumulation in the medium-term. Nation Building Tax (NBT) and Cess levy deficit to 3. Accordingly.1 billion GDP from 7. in May 2016 and imposition of a maximum loan to value ratio (LTV) on loans.

865 2.6 5.205. Department of State Accounts and Department of Fiscal Policy (a) Including other borrowings (net) 67 .541 (66.621 1.1 0.355.3 14.326 Total Net Financing 516.0 Revenue Surplus(+)/Deficit(-) -0.9 1.674 428.0 3. Item 2013 2014 2015 2016 (Provisional) Total Revenue and Grants 1.575 Foreign Investment in T Bills and Bonds 140.326 Net Foreign Financing (Net) 88.362 1.099 222.779 -71.817 317.847 184.564 369.245 211.733 -127.5 2.896 -106.394 2.3 14.6 12.113 -145.447 1.701.415 289.137.6 13.668 275.737 398.7 5.6 Net Domestic Financing 4.061 Chapter 05 | Fiscal Developments Tax Revenue 1.3 -0.2 0.1 | Summary of Government Fiscal Operations Rs.779 1.324 615.5 14.195.119 Net Domestic Financing (Net) 427.8 -0.857 Taxes on Goods and Services 572.244 -829.2 -2.431 Budget Surplus(+)/Deficit(-) -516.4 1. SRI LANKA | ANNUAL REPORT 2016 Table 5.5 5.7 4.693.557 Total Revenue 1.050.031) (17.MINISTRY OF FINANCE.4 Net Foreign Financing 0.463.5 -2.988) (13.669.180 1.014 7.967 (120.859 9.768 594.686.1 0.8 Sources: Department of Treasury Operations.4 12.7 -1.7 Recurrent Expenditure 12.5 10.281 151.895 Subsidies and Transfers 275.370 574.583 258.372 Grants 15.206 1.216 472.878 1.204.795.4 5.9 19.257 429.421 315.3 Total Revenue 11.4 17.942 192.761 Interest 444.883 Recurrent Expenditure 1.196 Non Bank Financing (Net) 256.692 -246.419 424.089 591.4 -5.0 11.730 570.290.552 144.454.897 40.689 Income Tax 205.496 Total Expenditure & Net Lending 1.502 640.306 1.115 262.243 829.2 1.322.666 198.812 196.657 1.1 Total Expenditure & Net Lending 17.979 -187.2 Budget Surplus(+)/Deficit(-) -5.737 576.1 12.204 486.127 127.757.516) Bank Borrowings (Net) (a) 30.5 13.896 1.333.005.7 7.398 362.844 99.130 Gross Foreign Borrowing 183.578 61.610 602.502 -640.865 Non Tax Revenue 131.7 -7.906 236.415 6.083 -154.396 1.4 0. Mn.971 222.6 Primary Surplus(+)/Deficit(-) -0.721 Primary Surplus(+)/Deficit(-) -72.863) As a % of GDP Revenue and Grants 12.007 436.6 -5.012 Other (16.8 15.543 556.911) Revenue Surplus(+)/Deficit(-) -67.4 Non Tax Revenue 1.317 422.679 460.9 11.0 4.395 527.148 20.229 440.275 -29.967 588.798 841.967 Taxes on External Trade 227.9 Grants 0.293 Capital and Net Lending 464.101 Public Investment 481.3 20.090 -591.782 Personnel Emoluments 393.982 561.898 1.643) (14.2 Tax Revenue 10.8 Public Investment 5.9 3.833 Other Goods and Services 92.227 610.832 803.849 -302.8 -1.153.249 Repayments -94.4 Total Net Financing 5.460.4 3.892 1.

NBT rate remained unchanged at 2.2 billion in 2016.3 billion in 2016 in items. 576. system at IRD in oder to facilitate an efficient and effective tax collection system through 68 . The Government solders. On income taxes. total net financing and the rest. a Indicators (KPI).8 percent. On the indirect taxes. It 5.0 percent of the administration while increasing revenue. new salary scale single corporate income tax rate of 17. several measures were financing during 2016 amounted to Rs. manageable level. MINISTRY OF FINANCE. In nominal terms.5 percent from 0.1 percent to Rs. ESC non-tax revenue increased by 124.4 billion mainly due to the increased profits while expanding the tax base to profit making and dividends transfers by SOBEs in banking businesses. were exempted. systems at the Department of Customs and the respectively in 2016 due to the initiation of RAMIS General Treasury.5 percent on selected deficit contained to Rs.3 percent to be affixed in liquor and liquor based products to Rs. fertilizer banking and financial services were proposed subsidy. the is also expected to implement a fool-proof sticker recurrent expenditure increased by 3.5 percent and 232.9 percent of GDP in 2016 from discourage liquor and cigarette consumptions. magazines and percentage of GDP declined to 19.4 percent to Rs rate increased to 0. lottery etc. several proposals increased fees and charges. 33.25 percent 222. Initial steps have been taken at IRD and the broadening the tax base of ESC to to draft a new Inland Revenue Act to simplify profit making businesses coupled with increased tax laws incorporating policies for the increase Chapter 05 | Fiscal Developments ESC rate from 0. Budget of the Ministry of Finance as against NBT.7 billion recorded in 2015.5 percent. and a rate of 28 percent on related expenditures such as Samurdhi. The of compliance and broadening the tax base.5 percent in 2015 for the calculation of excise duty.8 the basis of cubic centimeters was introduced percent of GDP in 2016 from 15.5 percent for public servants was implemented with effect and a higher tax rate of 40 percent for liquor.757. 211.1 implemented to rationalize current expenditure billion while net domestic financing amounted to while maintaining public investment at a Rs. was financed through domestic sources.5 percent from 5. Reforms were introduced to SOBEs to implemented an automated revenue collection increase their financial viability. Ceylon Petroleum Corporation increased to 15 percent from 11 percent and VAT (CPC) and Ceylon Electricity Board (CEB) and base was broadened. The periodic revisions of SCL on selected comparison to Rs. In addition to 2016 from 20. 640.9 billion in 2016. Meanwhile. 429. and assistance to differently-abled but yet to be implemented. All expenditure heads were controlled by the monthly budget monitoring Several measures have been introduced in 2016 meeting convened by the Department of National to augment revenue generating from VAT. on VAT remain yet to be implemented.. 1. The three band tariff 16 percent to Rs. from January 2016 while continuing the welfare tobacco. a unit rate of excise duty on to the decline in recurrent expenditure to 14. This was due the ad volarem rate. Meanwhile. 610.25 percent to 0. VAT rate and insurance. Net foreign On the expenditure front. followed by the decline in capital expenditure and periodic excise duty tax revisions were made to net lending to 4. The process of automation The budget deficit was mainly financed through of revenue agencies continued to improve tax foreign sources contributing 67.0 percent. items were implemented to protect farmers as well as consumers. SRI LANKA | ANNUAL REPORT 2016 You-Earn (PAYE) and Economic Service Charge RAMIS while strengthening automation of (ESC) increased by 7.5 billion in 2015. 829. The overall budget introducing a low rate of 2.0 percent in 2016 and The total expenditure and net lending as a items such as printed books.8 billion in 2016 stemming from to curb illicit liquor production while collecting increased expenditure on interest payments by due taxes to the Government. excise duties and SCL while strengthening the agreed action plan and Key Performance the tax administration. increased to 7. In contrast.0 percent while 588.1 billion in 2016 from Rs.9 percent in 2015. structure of exempt. However. 15 percent and 30 percent capital expenditure and net lending declined by was introduced in custom duty and PAL rate was 2.7 percent in solar panels etc.4 percent of GDP in 2015.

432. by 0. Mn.883 Recurrent Expenditure 1.2 percent in 2016 However.000 1.000 18.487 VAT .000 466.895 7.000 2.2016 Rs.286.883 47.000 610.Imports (Net) 125. This was a Chapter 05 | Fiscal Developments further improvements over the medium-term.310 30.000 190.757.000 35.000 46.Domestic (Net) 190. SRI LANKA | ANNUAL REPORT 2016 Various measures introduced in 2015 and 5.061 110.029 Sub Total 460.714 70.029 5.MINISTRY OF FINANCE.152 Transfers to Public Corporations & Institutions 55.101 60.714 20.689 Department of Inland Revenue Tax on Income and Profit 236.101 Sources: Department of Treasury Operations and Department of Fiscal Policy 69 .020 6.000 115.190 Other 352.000 10.203 6.000 88.714 Cigarettes 85. The fiscal consolidation process sustaining the elevated level of tax revenue in is also confronted with challenges stemming 2015.218 Salaries and Wages 590.000 1. Tax revenue certain shortcomings in expenditure and revenue to GDP ratio remained at 12. However.823 -3.000 156.576.239 Interest Payments 603.1 billion in 2016 from Rs.000 61.4 percent of GDP management. non-tax revenue as a percentage from increased cost of borrowing due to the of GDP increased to 1. increased recurrent percent recorded in 2015.372 78.825 -4.686.9 percentage points to 14.020 Department of Customs Import Duty 135.976 976 License Tax & Other 6.3 percent recorded in 2015. the total revenue increased by economic growth remains a challenge.689 31. Table 5.2 Government Revenue 2016 to enhance Government revenue and contain Government expenditure have helped The Government revenue to GDP ratio increased curtail budget deficit at reasonably lower level.000 334.145 4.730 6. of revenue mobilization amidst relatively lower In nominal terms.664 Nation Building Tax (Import) 20.061 Tax Revenue 1.9 percent in 2016 from 0.762 Sub Total 130.605 PAL 92.286 332.000 576.395 -1.686.372 Total Expenditure 2.904 15.719 Motor Vehicles & other 184.000 55.175 Excise Special Provisions 314.2 | Estimated and Actual Revenue and Expenditure .792 Petroleum 45.177 Cess Levy 55.000 831.000 88.857 VAT .145 Sub Total 41. fiscal consolidation path requires from 13.9 increasing interest rates.463. Meanwhile.857 22.770. Item Estimated Actual Deviation Total Revenue 1.203 Sub Total 801.000 55.134 -21.152 4.000 1.000 258.000 120.487 21.000 168.719 10.000 570.895 Pension Payments 169. structural fiscal adjustments are required to expand fiscal space in the medium-term. further reforms are needed to address trend experienced in recent decades.238 -9.782 -12. 15.000 120. sustainability dividends transfers by SOBEs.761 -19. 1.762 Other Telecommunication Levy 35.336 -9.121 5.238 -9.333. In significant improvement amidst the declining particular. Therefore.000 173.000 222.070 (20.866 Nation Building Tax (Domestic) 34.310 Department of Excise Liquor/Tobacco 130.216) Capital Expenditure and Net Lending 516.9 percent to Rs. This increase of non-tax expenditure on public sector wage growth and to GDP ratio was due to the enhanced profits and pension payments etc.792 3.000 39.121 Non Tax Revenue 144.730 Special Commodity Levy & Other 60.

2 0. Bn.1 .2 0.4 0. MINISTRY OF FINANCE.1 0.3 0.547 131.213 18.6 2.8 1.3 Ports & Airports Development Levy 0.028 70.1 0.165 142.500 .4 0.019 40.111 61.686 11.135 2.4 Nation Building Tax 0.844 99.647 7.351 46.5 0.470 Nation Building Tax 35.5 0.1 0.686.895 1. 800 Development Levy 6% 600 Cess 4% 400 Nation Building Tax Other Taxes Special Commodity 4% 200 1% Telecommunications Levy Levy 2% 2008 2009 2010 2011 2012 2013 2014 2015 Prov.8 billion in 2015 and non-tax revenue by 8.9 Non Tax Revenue 1.646 58.8 0.9 11.583 258.462 1.321 15.3 0.195.089 66.1 12. 99.137.5 0.5 13.000 Value Added Tax 19% Ports and Airports Rs.604 250.857 VAT 225.108 132.9 1.8 Import Duties 1.292 26.454. 1.7 10.355.700 256.825 Other 60. Chapter 05 | Fiscal Developments 2016 Item 2011 2012 2013 2014 2015 (Provisional) Tax Revenue 845.800 Excise Duty 31% 1.4 percent to Rs.6 Social Security Contribution 0.454.8 Special Commodity Levy 0.2 Central Bank Profit Transfers 0.1 0.005.7 2.4 2. Mn.7 1.487 Ports & Airports Development Levy 66.1 Profit and Dividends 0.310 172.5 0.173 22.4 1.814 29.8 0.5 Excise Duty 2.878 1.937 44.9 Interest/ Rent 0.622 33.858 229.8 2.000 Other 2.4 billion in 2016 from Rs.115 262.5 4.3 0.426 11.953 52.919 15.2 2.583 45. 1.6 1.632 72.6 2.3 14. Table 5.5 3.499 44.754 Total Revenue 967.189 156.123 81.046 Central Bank Profit Transfers 22.851 Non Tax Revenue 122.738 15.798 108.3 0.2 1.061 As a % of GDP Tax Revenue 11.4 0.960 250.051.1 0.600 Income Tax 18% 1.4 Income Tax 2.5 0.050. 2016 70 .8 0.7 0.5 0.424 Excise Duty 204. The tax revenue increased Rs.806 Profit and Dividends 34.823 Special Commodity Levy 15.4 0.2 Sources: Department of Treasury Operations.705 47.099 222.0 2.689 Income Tax 157.3 | Government Revenue Rs.355.4 0.1 0.690 497.8 0. - Total Revenue 13.1 1.362 1.004 57.000 43.468 3.5 0.4 12.862 1.5 10.779 1.9 0.1 2.917 87.995 13.466 2.1 0.952 Import Duties 79.343 2.000 26.9 2.372 Interest/ Rent 13.1 billion in 2015.7 billion in 2016 from expanded by 124.5 0.2 VAT 3.463.760 107.169 46.0 2.7 0.697 908. 222.9 0. SRI LANKA | ANNUAL REPORT 2016 1.9 billion in 2015.4 12.987 68.811 80.2 0.145 14.5 0. Department of State Accounts and Department of Fiscal Policy … Negligable .5 Other 0.3 0.200 Import Duty 11% 1.5 0.761 35.1 0.206 1.606 Social Security Contribution 12.463.821 223.6 2.4 0.4 10.6 0.623 454.255 77.9 Sales and Charge 0.700 283.736 40.915 1. 5.666 198.276 55.350 219.not available Chart 5.4 0.6 2.2 | Composition of Tax Revenue .594 205.628 11.400 1.644 88.523 275.552 144.4 0.4 0.0 percent to Rs.9 0.160 Sales and Charge 37.1 | Government Revenue Chart 5.720 35.0 11.155 83.2016 1.447 1.350 11.7 0.580 60.666 46.2 0.667 38.

This increase was mainly Source: Department of Fiscal Policy * Including Super Gain Tax of Rs.276 55.169 7.8 VAT .8 NBT .Excise 263. Revenue from PAYE tax Corporate & Non Corporate 167.8) PAYE 26.644 88.238 14.527 168. 262.336 29.5 Chapter 05 | Fiscal Developments ESC 6.6 billion in 2015.395 8.632 419.029 39. due to the increase of ESC rate to 0. % of GDP 150 The revenue collected from income tax declined 1.689 8.0 Total Tax Revenue 1.470 186.5 revenue to GDP ratio declined to 2.044 39.719 23.121 11.471 46. 49. 26. ESC Tax on Interest Income Tax .906 -11.2 Tax on Liquor 105.1 Tax Revenue Chart 5.458 232.3 billion in 2016.25 percent coupled with the removal of the maximum tax liability of Rs.MINISTRY OF FINANCE.206 28.1) Domestic Consumption Based Taxes 347.4 VAT .4 percent in 2015.463.By Source Rs.4 percent to Rs.6 Motor Vehicles . Income tax 0. 154.857 (1.8 percent to Income Tax 262.2. Rs.50 percent from 0.324 (7.5 100 moderately by 1.458 232.0 50 2016 from Rs.Import 16. 20.812 3.904 55.113 10.8 Tax on interest 62. This was mainly Prov.148 20.779 1.704 (2.8 increased by 7.5 percent to Rs.730 33. Mn.Domestic 28. 120 million per year 71 .960 18.358 35.8 billion in 1.0 The total revenue from income tax includes 250 2.8 Bn.8 ESC expanded significantly by 232.325 154.Domestic 130.976 7.015 88.5 | Performance of Income Tax Rs. 28.906 (11.792 11. Source 2015 2016 (Provisional) 2016/2015 Change (%) Income Tax 262. due to the one-off tax collection of Rs.825 6.355.823 51.487 18.3 NBT .499 (29.324 -7. ESC and withholding tax on interest income.2 percent in 0.897 20. Bn.5 corporate and non-corporate income tax.5 PAL 58.173 115.206 28.Import 89.8 percent to Tax on Interest 62.092 55.% of GDP (Right Axis) Table 5.289 61.857 -1.234 120.3 Tax on Cigarettes/Tobacco 80.8 Other 8.Excise 45.4) Corporate & Non Corporate 167.148 20.169 7.2) Licence and Other 41.2 billion in 2016 PAYE 26.134 28.583* 258.4 Rs.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 from 2.8 Cess Levy 46.5 SCL 52.5 billion in 2016.583 258.0 tax.325* 154.814 4.2 billion in 2015 while revenue from ESC 6.093 738.4 Petroleum .3 | Performance of Income Tax Income tax 300 3.1 Rs. Mn.0 Other (Excise) 3. 258.5 3. PAYE 200 2.189 156. SRI LANKA | ANNUAL REPORT 2016 Table 5.0 Source: Department of Fiscal Policy 5.4 | Government Tax Revenue .8) Import Based Taxes 704. 49.9 Import Duties 132.145 25.5 from Rs.2 Telecommunications Levy 33.8 billion Corporate and Non-corporate PAYE from the Super Gain Tax (SGT) in 2015.904 55. 2016 Revenue collected from corporate and non- Item 2015 Growth % (Provisional) corporate income tax dropped by 7.

961 120. 497. single cabs.757 275.339 Gross Revenue 232. 115.2 vehicle imports.350 219.4 percent in declined by 58.5 billion in 2016 from 2015.1 2. revenue generated billion in 2016 from Rs.6 2. This was mainly due to the declined Rs. VAT revenue as a share motor vehicle imports by 28 percent (motor cars of total tax revenue expanded to 19.7 percent.2 percent to Rs. and 2016 from 16.413 131.2 percent in 2015.5 3. introduction of new valuation method and imposing a maximum loan to value ratio (LTV) Policy measures taken to increase the VAT rate on loans and advances. that is 31.7 percent. Further. doubles cabs. telecommunication services and loopholes arising from the under-valuation while cigarette and tobacco products contributed to expanding its coverage for electric vehicles and this increase.539 126. The use of zero-emission VAT administration followed by the initiation vehicles has been encouraged with the reduction of RAMIS helped increase the efficiency of VAT of applicable excise duties.836 284. The increase of buses by 40.3 period along with the Government policy percent to Rs. 263.1 percent. refrigerator trucks and garbage trucks were the VAT revenue on imports.3 billion in 2016 from Rs.858 229. 72 . Further.634 220. 131.700 283. the concessionary vehicle permit by 8.5 percent in 2016 helped enhance cabs.284 1. interest income declined by 11.1 Source : Department of Fiscal Policy Value Added Tax (VAT) The revenue from motor vehicle imports significantly declined by 29. goods transport vehicles VAT revenue was due to the rise in tax revenue by 27.206 232.7 billion coupled with duty on motor vehicles during the reference the increase in VAT revenue on imports by 29.136 686 Net Revenue 225. crew imports by 2.) in 2016 stemming from the increased excise 168. passenger van. 89.1 percent in 2016 Table 5.8 billion from Rs. Mn Item 2011 2012 2013 2014 2015 2016 (Provisional) Domestic 111.1 percent to the total tax has been granted for importing a vehicle under revenue. The revenue forgone from the decline in excise duty collection from motor excise duty under the scheme declined to Rs.1 percent from domestic activities by 28. the improvement of motor bicycles in 2016. SRI LANKA | ANNUAL REPORT 2016 and the exemption of profit-making businesses due to the decline in the volume of issuance of from ESC liability.156 Refunds 6.604 250. 219. 283.7 2.7 billion in 2015. etc.6 | Value Added Tax Revenue Chapter 05 | Fiscal Developments Rs.662 168.753 251. This was mainly due to reintroduced in 2016.149 439 1. 454. withholding tax on Government Securities.174 115.6 percent to Rs. Excise Duty The revenue generated from excise duty declined Meanwhile.6 billion in 2015. revised as a measure of correcting anomalies prevailed in the duty structure..214 124. the increase in the value of on lorries. MINISTRY OF FINANCE.5 billion in 2016 from Rs.348 3. In addition. As an from excise duty remained as the largest single incentive for vehicle exporters.658 140.2 percent to Rs. However. vans.221 89.538 136. three wheelers by 64. The unit tax rate applied to 15 percent from 11 percent and the removal to motor vehicles was revised to maintain its of the exemptions granted to sectors such as revenue buoyancy by minimizing revenue health services.245 112.5 billion in by 29 percent to Rs.470 Net Revenue as a % of GDP 3. a duty concession contributor.2 towards discouraging the imports through the billion in 2015. 38. However. The total revenue collected from VAT increased 186.0 billion in 2015.9 billion in 2016 from schemes for Government servants were Rs.196 276.817 Imports 120.6 2. 40. the duty rates collection.

80.240 80. Department of Customs and Department of Excise the specific conditions to encourage such vehicle Excise duty revenue from cigarette and tobacco export industries. Ltrs Rs.9 percent of motor cars declined by 57.623 454.3 2015 51. three. increased by 11.0 2011 53.567 57. Chart 5.3 4.0 Sources: Department of Fiscal Policy.5 4.Bn) (Rs.470 186.6 0.3 53.087 3.700 256.2 71.821 223.6 124.0 4. However.469 4.5 | Liquor Production and Excise Tax Revenue 90 4 80 140 140 70 120 120 3 60 Bn.2 2012 49.3 80.719 Other 5.9 87.234 120.789 -7.0 39.130 28.7 2014 43.4 69.2 percent.9 125.6 22.2 40.1 4.531 263.2 (58.478 98.9 7.4 | Cigarette Production and Excise Tax Revenue 5 100 Chart 5.646 78.008 69. Mn 2016 Item 2011 2012 2013 2014 2015 (Provisional) Liquor 55.907 in 2015.0 percent.0 105.5) 3.8 billion in 2016 from Rs.5 3.286 60. SRI LANKA | ANNUAL REPORT 2016 Table 5.509 96.8 14.116 9.9 percent. 50 Mn.0 percent to Rs.499 Petroleum Products 22.8 48. Sticks 100 100 Rs.4 28.100 105.0 4.5 4. the number of motor vehicle mainly due to the upward revision of duty rates registrations declined by 26.732 45.2 percent to 493.1 88.1 2.792 Motor Vehicles 71.704 Total 204. Bn.623 53.516 3.777 -6.0 billion in 2015.812 3.3 55.952 Source: Department of Fiscal Policy 73 .286 4.328 on cigarettes and tobacco products.960 250.8 1.7 2013 44.5 22.6 7. buses by 35.336 2. Hard Liqour Malt Liquor Excise Tax Revenue (Right Axis) Quantity Excise Tax Revenue (Right Axis) Table 5. the registration consumption of cigarettes declined by 7.3 13.0 10.2 58.7 -7.5 -3.6 4.6 8.470 28.1 percent discouraging the consumption of cigarettes and and dual purpose vehicles by 31.563 58.320 -3.8 11.2 21.7 34.8 8.2 -11. This was Moreover.2 -2. 88.6 99.2 28.3 52.6 8.3 55.6 66.7 | Production and Excise Tax Collection from Liquor and Cigarettes Quantity Produced Excise Tax Revenue Year Hard Liquor Malt Liquor Cigarattes Liquor Cigarattes % Change % Change % Change % Change % Change (Liter Mn) (Liter Mn) (Mn.8 17.1 120.101 -8. Bn) 2009 41. Sticks) (Rs.238 Cigarettes/Tobacco 49.3 59.0 49.798 3.035 -6.086 66.4 20.1 -10.MINISTRY OF FINANCE.092 55.6 57. the in 2016 from 668.9 8.015 88. Bn.690 497.9 53. 80 80 2 40 60 60 30 40 40 1 20 20 20 10 0 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015 Prov 2016 Prov.9 37. tobacco and the strict enforcement of legislations such as National Alcohol and Tobacco Act.466 27.9 -0.6 3.9 2016 55.8 Chapter 05 | Fiscal Developments 2010 49. in 2016 resulting from the Government policy on wheelers by 56.8 | Excise Duty Revenue Rs.9 120.5 37.

132. 55.233 132.7 8.3 35. onions.920 -14.3 59. 156.866 44.2 billion in 2015.6 percent to Rs. This affected to the performance of the revenue was mainly due to the increase in excise duty on generated from import duty.4 158.3 101.724 -13. by 18.906 4.030 108.247 5.084 41.3 billion in 2015.221 -43.9 140.218 32. 3/- per liter in August 2015 coupled with increased Meanwhile.586 83.003 654. green gram.0 72.9 51.2 billion in 2016 from Rs. This increase was mainly attributable to the increasing number of products Import Duty and Special Commodity coming under the SCL and upward revisions of Levy (SCL) the SCL rates to encourage domestic production of potatoes. However.6 56.6 -64. percent in 2016.1 Passenger Van and 1.781 -49.0 -40.7 Other 408 402 510 322 -6.3 -58.514 -30.664 44.6 Three-Wheelers 80.5 26. Chapter 05 | Fiscal Developments Table 5. of Motor Vechicles % Change Item 2013 2014 2015 2016 2013 2014 2015 2016 Motor Bicycles 159.9 -28.1 Tractors 13.233 13.9 -36.511 14.1 20. 52.865 47.4 percent to Rs.7 under the investment agreements adversely billion in 2016 from Rs.3 percent to Rs.5 billion in 2016 from Rs. the import duty exempted items such as fertilizer. pharmaceutical manufacturing items and machinery and equipment used for supply and 74 .1 Transport Vehicles 25.424 -17.7 0. malt liquor by 58.441 329.0 Source: Department of Customs The excise duty revenue collected from petroleum distribution of electricity and exempted items products increased by 23. MINISTRY OF FINANCE. the excise revenue collected from duty rates on both hard and malt liquor products liquor products increased by 14.0 6. the revenue from SCL increased by import volume of petroleum products by 12.791 322.9 Total 308. SRI LANKA | ANNUAL REPORT 2016 Moreover. 45.2 billion in 2015.3 -27.820 471.9 | Motor Vehicle Imports No.687 2.8 percent to Rs.942 2.7 Buses Motor Cars 27.627 3.5 165. big onions. at end 2015 despite the decline in production of 120.398 482.655 25. Gas oil/ Diesel to Rs 13/. This increase was mainly supported by the upward revision of import duty rates on certain items and simplification of tariff band structure in 2016.3 -5.2 -1.257 349.6 3.per liter from Rs. 105.2 -58.5 percent owing to the severe This was due to the upward revision of excise floods occurred during Mid-2016.4 -5. and Revenue collected from import duty increased sugar etc. 55.1 billion in 2015.8 billion in 2016 from Rs.

. 175 Pomegranate (other) . 230 Mangoesteens ..oil .25 10 Chilies .Not Crushed 25 25 Crushed 125 125 Canned fish 50 50 Sugar .Neither Crushed nor Ground 102 102 Turmeric .Crushed or Ground 52 52 Seeds of Cumin 162 162 Seeds of Fennel 52 162 Turmeric . whichever is higher whichever is higher Mackerel 6 6 Yoghurt 625 625 Butter 880 880 Margarine(Fat 80% or more) 175 215 Margarine (Other) 275 315 Salt 40 40 Dates 60 60 Dried Grapes .10 | Special Commodity Levy Rates Rate (Rs. 200 Dried Orange .Crude 110 150 Palm olen 155 Refine 130 170 Other Veg.oil Refine (RBD Palm oil) 175 Palm kernel -Crude 130 170 Palm kernel -Refine 145 185 10% of the CIF value 10% of the CIF value Fish or Rs.Other 360 360 Mathe .White 30 13 Row/Brown 15 Watana .Seed 50 50 Kurakkan 70 70 Millet/other 70 70 Kurakkan Flour 150 150 Black Gram Flour 200 200 Ground Nut . 175 Cherries .Whole 7 7 Split 10 10 Black Gram 60 60 Cowpea 70 70 Maldive Fish 102 102 Dried Fish 102 102 Orange-Fresh 65 65 Grapes . 200 Maize 10 10 Sources :Department of Trade and Investment Policy 75 .Whole 0.Whole 15 15 Split 18 18 Chick Peas . 200 Pears . 200 Kiwifruit . Per kg) Item End 2015 End 2016 Sprats 11 11 Potatoes 15 40 Red Onions 5 25 B Onions 5 40 Chapter 05 | Fiscal Developments Garlic 40 40 Green Gram 10 40 Lentils . 75 per kg.25 5 Split 0.MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Table 5. 10 per kg.Neither Crushed nor Ground 26 26 Seeds of Coriander .Fresh 45 45 Seeds of Coriander . 250 Plums and sloes .Fresh 130 130 Apples .Shelled 112 112 Mustard Seeds 62 62 Palm oil / Veg. or Rs.

5 percent from 5.2 percent of removal of threshold applicable to hotel. the processing of any locally on imports increased by 35.8 billion in 2015.5 percent to Rs. 108.4 concessionary rate of 2.0 procured agricultural produce in the preparation billion in 2016 which was mainly collected from for sale. This increase was mainly due Source: Department of Fiscal Policy to the increased profits and dividends transfers by SOBEs. 3.2016 applicable Cess rates for export of raw rubber Provincial Council Revenue (Rs. Total 28.5 percent.5 percent Meanwhile.. 57.2.4 billion in to 7. the Cess revenue preparation for sale to Rs.782 48 of such products. MINISTRY OF FINANCE.6 percent to Rs. the Councils .8 percent to Rs. 36. 61. Petroleum Corporation and the AirPort and Aviation Services (SL) Ltd.0 billion in 2015. the applicable Cess rates on imported meat such as beef. 18.75 million per The total Cess revenue increased by 33. new pneumatic locally procured agricultural produce in the tyres and lubricants.2 billion increased by 51. 2016 from Rs.7 billion in 2016 due to the plunge in from NBT was transferred to Provincial Councils world demand for tea.11 | Transfer of NBT Revenue to Provincial revised during the year 2016. However. billion in 2016. printed or colored woven fabrics. Rs. Meanwhile.584 9 telecommunication activities. 29. labour (manpower) only for processing of any un-denatured ethyl alcohol.0 percent with effect from 2016 from Rs. 28. restaurant. Furthermore. guest total tax revenue in 2016.6 billion in 2015.0 billion while the revenue from NBT used for pharmaceuticals industry were granted on imports increased by 8.2 percent industries and machinery. sectors.2 percent of the total revenue. rubber and mineral (PCs) under the revenue sharing mechanism.0 percent to Rs. The revenue from Cess house.436 5 13. and sheep Table 5. the raw material to Rs. turkey. Sabaragamuwa Province 1.4 percent to Rs. 33. This surge 76 . Telecommunication (PAL) Regulatory Commission. Meanwhile.2 Non-tax Revenue Uva Province 1.4 billion in 2016 from Rs. The revenue from profits and dividends transfers by SOBEs such as Sri Lanka Insurance Ports and Airports Development Levy Corporation Limited. educational services and supply of cement.436 5 5. which accounted for Eastern Province 1.436 5 124.0 billion in 2016 from Rs.5 percent to Rs. increased by 263. Although the standard rate of Chapter 05 | Fiscal Developments was mainly due to the improvements in 7. In addition. 58.584 9 by 7. 59.436 5 The total non-tax revenue.8 billion in in 2016 from Rs. 222.7 billion of revenue collected to Rs. This increase 1st January 2016. 88. 39.1 billion in 2015. Revenue collected from PAL significantly etc. 25 million per quarter. from exports declined marginally by 1. 3 million per quarter and the to Rs. 45. there was an impact on the revenue with the policy measures taken Cess Levy in the latter part of 2016 to reduce the threshold for the registration from Rs. increased by Northern Province 1.436 5 North Central Province 1. domestic and import related activities in 2016.5 percent applied to import of general goods.712 100 99. dairy. the revenue Central Province 2. 2.4 percent quarter to Rs. Mn) % of the Total was reduced in order to encourage exporters Western Province 13.584 9 from Telecommunications Levy increased Southern Province 2. certain items such as plant and machinery The revenue collected from NBT on domestic used for construction. agricultural activities significantly increased by 39. tiles.4 billion in 2015 due to the enhanced North Western Province 2. SRI LANKA | ANNUAL REPORT 2016 Nation Building Tax (NBT) Revenue collected from NBT significantly was mainly due to the increase in the PAL rate increased by 27.5 percent to Rs.7 billion and accounted 4.

Social Security Contributions and visa fees helped increase revenue from sales increased by 18.4 100. 2016 (% of 2016 2015/2016 Item 2011 2012 2013 2014 2015 Total Non (Provisional) (% change) Tax Revenue) Interest/Rent 13.1 Profits and Dividends 34.871 713 Subsidy Act Coconut-under Coconut Development 121 127 141 Coconut 485 471 709 Act EDB Cess.289 61. 77 .738 15.351 46.135 2.606 62. 18.806 115.468 3.292 549 Export) Act.000 43.13 | Non-tax Revenue Rs.731 60.099 222.058 Agriculture 31.2 Total 122.672 Development Tea-under Tea (Tax and Control of 700 640 587 Tea 331 7.466 2.845 99.0 billion and charges. 5. Mn.230 1.934 1.6 percent to Rs.707 46.622 43.160 263.832 Cashew 40 35 40 Development Act Minor Export Crops Cess on Imports (Cinnamon.173 22.771 Development Act Sector Development Total 38. 15. Sri Lanka Tea Board Law Rubber-under Rubber Replanting 33 12 10 Rubber 763 2.547 131.162 Source: Department of Customs and Department of National Budget (a) Provisional Table 5.858 49.1 Central Bank Profit Transfers 22.165 142.MINISTRY OF FINANCE.0 1.571 27.169 46. Coffee.761 35.576 59.628 11. increase embarkation levy to USD 30 per ship and 7.7 Social Security Contribution 12. Pepper) Fertilizer Subsidy for Total Imports.under Sri Lanka Export 2.500 .0 Sources : Department of Treasury Operations.754 29.343 2.600 30.372 124.721 35.2 Other 2.085 2.552 144.647 7.350 11. Department of State Accounts and Department of Fiscal Policy The revenue from rent significantly increased by Policy measures taken by the Government to 115.8 billion in 2016 from Rs.499 44.6 Sales and Charges 37.730 Total 33.6 8.000 26.995 13.9 percent to Rs.321 15.046 18.000 .713 2.145 14.3 billion in 2015 due to the efficient management air passengers coupled with increased passport of public assets.0 48.919 15.686 11.632 72.019 40.9 7. Mn Cess Revenue Subsidy Cost Description Description 2014 2015 2016(a) 2014 2015 2016(a) Chapter 05 | Fiscal Developments Commercial Crop Cess on Exports 3.7 32.426 11.814 29.798 108.12 | Cess Revenue from International Trade and Government Subsidy for Agriculture Sector Development : 2014-2016 Rs.under Sri Lanka Export 35. 254 360 380 Cocoa. reflecting the increase in public sector salaries. 2.292 26. SRI LANKA | ANNUAL REPORT 2016 Table 5.213 18.

2 135.2016. Item 2015 2016 Est. SRI LANKA | ANNUAL REPORT 2016 Table 5.2%. 12 million per annum from Rs.0 million for quarter and the removal the threshold of Rs. VAT 219.5 The significant increase in VAT revenue recorded in 2016 was mainly due to the effective implementation of RAMIS in IRD.7 percent growth compared to 2015 . by 11.9 Excise duty revenue decreased by 8. during the period excise duty revenue from liquor.5 for certain selected (PAL) items with effect from 01.25 million per quarter applicable to hotel. 3.686.4 The increase in payment of profits and dividends by State Owned Business Enterprises and increased collection of Social Security Contribution from public sector employees due to basic salary increase were positively contributed for this revenue increase.1 156. the rate increase of International Telecommunication Levy to USD 12 cents per minute from USD 9 cents per minute is contributed in revenue increase. When exclude the Super Gain Tax revenue.8 billion of Super Gain Tax which was an one off Levy.454.0% and by 23. restaurant. This was further supported by the improvements in domestic and import related taxable activities during the year.0 1.0 88.6% respectively in the corresponding period. Other Taxes 140. The revenue from ESC is also showed a substantial increase due to expansion of tax base by removing exemption on profit making companies and the increase in the ESC tax rate from 0. Bn.14 | Variance Analysis of Government Revenue Rs.0 454. This was further supported by the policy measures taken by government to increase the VAT rate to 15 percent from 11 percent. Income tax revenue contained Rs.576.0 283. 2016 Reason Income Tax 262.3 Source : Department of Fiscal Policy 78 .5 percent. contributed for this revenue increase.6 444.8 In 2015.0 156.9 1. Further.5% and restriction of concessionary rate of 2. MINISTRY OF FINANCE.0 258.0 222.6 92. Chapter 05 | Fiscal Developments income tax revenue for 2016 recorded 21. etc contributed to this revenue increase. In addition.3%. Non Tax Revenue 99. threshold reduction to Rs.01. Import Duty 132. However. duty rate revision and volume increase contributed to this revenue enhance. telecommunication services and cigarette and tobacco products.75 million Tax (NBT) to Rs.8 Increased in number of items coming under the Special Commodity Levy (SCL) and the rate revision of the SCL coupled with the increase of Cess rate on textiles and footwear helped to increase the revenue.8 Policy measures has taken to increase the standard rate of PAL from 5% Development Levy to 7.0 54.5 This growth was mainly supported by the upward revision of import duty and simplification of tariff band structure in the review period of 2016 and the increased in consumer goods importatin during the year.0 57.25 percent to 0. Port and Airport 58.6 percent compared to 2015 mainly due to a decline in the excise tax revenue from motor vehicles by 29. Total 1.6 236. 49. This increase of revenue is mainly due to the implementation of RAMIS in IRD. Excise Tax 497.0 163.7 315. cigarettes and petroleum products increased by the 14.1 144. guest house. 15 million per annum and the removal of the exemptions on health services. Nation Building 45.4 Broadening NBT tax base by reducing the threshold from Rs 3. Policy measures were taken by government to increase embarkation levy to USD 30 per ship and air passengers coupled with increased passport and visa fees are also helped to increase revenue from sales and charges.

2016 Tax exemptions were granted for importing vehicles for the members of the 8th Parliament.2016 permit by a member of Parliament.2016 Minister of Sri Lanka.2017 Excise duty on bottled toddy was increased to Rs. journals and periodicals other than news papers were exempted from PAL. .04. Excise duty rates on motor vehicles were revised and unit rate based excise duty on the motorcycle were 11. Excise (Ordinance) Duty 01. Cess rates on the import of beef.08.2016 Cess rates on the import of aerated beverages were revised. 100 per Kg from 30 percent 15. A license fee of Rs.2016 Cess rate on import of beedi leaves was revised. 50.2016 or Rs. 01.2016 . 79 .10.2016 Restrictions on retail sale and transportation of foreign liquor were imposed. 01. 24.2016 for the vehicles imported for personal use and Letter of Credit (LC) opened on or before 20. Ports and Airports Development Levy (PAL) . 200 per bulk liter Excise duty specified in the Extra Ordinary Gazette No.5 percent from 5 percent.01. 30 per litre.06.01.2016 Excise duty rate on gas oil/diesel was increased to Rs.01. magazines.11. 04.11.01.2016 .2015 was granted 12.2016 Cess rates on the import of aerated beverages were revised.2016 Excise duty on the cigarette was revised. a Sri Lanka diplomatic officer who serves in missions abroad and a member of Provincial Council.01.01. Stamp Duty 01.2016 introduced.11.2016 concessionary permit issued for the public officers. Excise duty concessions were granted for the vehicles imported on a concessionary permit for those who 19.05.2016 vehicles was introduced based on kilowatt of the motor power of the engine.01. 13 per litre from Rs.2016 Stamp duty on foreign purchases using credit cards was increased to 2.2017 Annual liquor license fees were revised.5 percent.000 for arrack licenses which issued together with a foreign liquor license and Rs. . 01.2016 rendered distinguished service to the country or awarded to such persons under certain conditions.2017 The allowance for the loss of ethanol by evaporation and leakage in storage and transportation was reduced.2016 . Cess Levy 15.2015.2017 for the sale of bottled toddy were imposed. dairy and construction industry were exempted from PAL.2016 Excise duty rate on bottled toddy was increased.5 percent was extended to electronic and electrical items. 11.07. 50 per litre from Rs.2016 Tax exemption was granted for vehicles imported for the Governor of a Provincial Council. Excise duty concessions with certain conditions were granted for the vehicles imported on a concessionary 29. Excise duty on motor vehicles was revised based on unit rates of the motor vehicles and excise duty on electric 27.05.2016 Cess rate on the export of raw rubber was revised to Rs.Concessionary rate of 2. . 07.000 01. excise duty on canned beer was imposed.5 percent was extended to the raw material used for pharmaceutical industry. 01.12.01.05. 225 per Kg. SRI LANKA | ANNUAL REPORT 2016 Box 5. Tax exemptions were granted for the articles/vehicles imported for the official use of the President or the Prime 16.1 | Major Fiscal Measures: January 2016 – April 2017 Effective Measures Date Chapter 05 | Fiscal Developments Excise (Special Provisions) Duty The concession on duty rates specified in the Extraordinary Gazette No.2016 was exempted on foreign 04.2016 liquor imported for the purpose of re-exports or sell at the duty-free shops.08. 50 per bulk liter 01. 01. 3 per litre.11.06. 100 per bulk liter .08.Stamp duty on issuing share certificates was removed.04.2016 Excise duty on vehicles with chassis fitted with engines and cabs less than four years old was imposed. 01.10.Malt liquor Rs.Stamp duty on local purchasing using credit cards was removed. 15 per Kg.01.2016 .02. 100. Excise duty concessions were granted to purchase a locally manufactured or imported motor vehicle on a 19.09.2016 Excise duty on ethyl alcohol was revised.05.08. Excise duty on imported foreign liquor was imposed as follows: . 01.Other foreign liquor Rs. 11. turkey.01. In addition. 20.The PAL rate was increased to 7.Concessionary rate of 2.Selected machinery and equipment used for agriculture. 1903/39 dated 26. and sheep were revised to 15 percent or Rs. 1981/87 dated 26.Foreign wine Rs. 02.06. Rs. 29. 4 per Kg from Rs. 13.Printed books.MINISTRY OF FINANCE.

13.Imported milk powder and locally produced milk powder containing added sugar or sweetening matters were 01. 8 per Kg.5 Mn. The specified items imported under the Standard Power Purchase Agreement with CEB (hydro. per annum from Rs. 17. 01. 800 per liter from Rs.08.2016 Import duty on ethyl alcohol was increased to Rs.08.75 Mn.03. 12.2016 Dendro only) was shortlisted. wind and 10.The VAT rate was increased to 15 percent from 11 percent. solar panel modules and 11. per quarter. .S National Sub-Division was created for palm olein.05.11.11.11.09. 12.05.2016 .The certain supplies such as the supply of telecommunication services. onwards .2016 purpose.2016 The value of motor vehicle imported and registered on 100 percent duty-free basis was depreciated for disposal 20.The existing exclusion of profit making business was removed. and 01.The NBT exemptions applicable to telecommunication services.5 percent from 0.11. The following items were exempted from the VAT.The cost of any health care services other than fees paid to medical practitioners.2017 New HS National Sub Divisions was introduced for rice varieties.12.2016 accessories were exempted. . . 50 Mn.S National Sub Divisions was created for selected commodities as requested by the business community.Plant.The ESC rate was increased to 0. 35 per Kg. 500 per liter.04. . SRI LANKA | ANNUAL REPORT 2016 Effective Measures Date Cess rates on the import of identified hundred items including prefabricated buildings.05. MINISTRY OF FINANCE.2016 19.04.2016 26.11. 15.07.02. 29. were removed. 12 Mn. 500 per liter from Rs. the supply -11. defatted coconuts etc. and .2016 Import duty on PP bags was revised to Rs. cane molasses. per year was removed.Import duty on steel billets was increased to Rs.Import duty on lubricants was reduced to 15 percent from 30 percent. electrical and electronic goods and telecommunication equipment were made liable for VAT. 01. per annum. 120 Mn.Magazines. channeling fees and hospital room charges was excluded from VAT. . perfumes.2016 80 . high tech equipment including copper cables for the telecom industry. per quarter.2016 . .2016 made liable for VAT.The threshold for VAT liability for wholesale and retail trade was reduced to Rs.11. 07.09. magazines. . cigarettes.ESC was imposed at the point of importation on SCL liable goods.2016 .A new H. . journals or periodicals other than newspapers. 03. lard.5 Mn.The VAT registration threshold was reduced to Rs.2016 . .ESC was imposed at the point of importation of gold and other precious metals.2016 of goods or services to a specified project other than any housing project were removed.25 percent.05.06.2016 Import duty on rice was increased to Rs. machinery.2016 sunflower seeds.2017 . Economic Service Charge (ESC) Chapter 05 | Fiscal Developments .2016 .2016 H. Customs Import Duty 01. . coal. journals or periodicals other than newspapers . . 24.Certain electrical goods Nation Building Tax (NBT) Period of . import or supply of telecom equipment Period of or machinery. . 3 Mn.11.Liquor.ESC threshold was reduced to Rs. medical consultation fees. per quarter from Rs.06. the supply of electricity. 02. 14.Import duty on industrial raw materials was reduced. and supply of goods or services to any specified project other than housing -11. .2016 local telecom operators by TRC. 3.NBT registration threshold was reduced to Rs. 12 per Kg from Rs.Import duty on ethanol was increased to Rs.ESC was imposed at the point of importation of vehicles. the issue of licenses to 02. and accessories imported for renewable energy 11.11. per quarter. Customs Valuation and Others 01. 11. 12.The existing maximum liability of Rs.The carry forward period of ESC credit was reduced to 3 years from 5 years. 15 Mn.2016 onwards NBT on printed books. 15 per Kg..Medical machinery and medical equipment . Value Added Tax (VAT) . lubricants.07. 10 per Kg.01.2016 The method of Customs valuation of motor vehicles was revised. 25.2016 project were made liable for VAT. per quarter from Rs.07. 50 per Kg from Rs.2016 Import duty on wheat grain was increased to Rs.2016 .96 tariff lines of import duty were adjusted according to the bound rate commitment to the World Trade Organization (WTO). 400 per liter.

turmeric 21. chillies.11. coriander. 17. 0.SCL on fish was increased to 10 percent or Rs. kurakkan. apples. was extended for a period of six months. 20 per Kg. .05. 10 per Kg for a period of 30 days. from Rs.The validity period of SCL on potatoes and B’ Onions was extended for a period of six months. chickpeas. 81 . . The validity period of SCL on 15 items including dried fish. black gram.02. . green gram. 20 per Kg . 02.B’ Onions to Rs. 0.SCL on red onion was increased to Rs. mustard seeds.SCL on vegetable oils was decreased by Rs. The validity period of SCL on mackerel fish.SCL on maize was re-imposed at the rate of 10 percent. dates and cumin was extended for a period of six months.09. was extended for a period of six months. 01. cowpeas. was extended for a period of six months. Nadu rice (red or white) and 28.2016 The validity period of SCL on red onions. was imposed.The validity period of SCL on fish. 25.Spilt lentils to Rs. 10.07. 15 per Kg. 5 per Kg and SCL on fennel seeds was increased to 21.2016 kurakkan.2016 respectively. 10 per Kg.11. 52 per Kg.01.2016 . 15 per Kg. 10 per Kg 24.2016 A method for determination of cost of freight was introduced for Customs valuation purpose. cumin and fennel was extended for a period of six months.2016 per Kg. 08. Nadu rice (red 27. 13. SCL on sugar was revised for a period of six months: 16. The validity periods of SCL on maize and vegetable fats were extended for one month and three months. butter. 08. 5 per Kg The validity period of SCL on 8 items including mackerel fish. chillies.White sugar to Rs. grapes.The validity period of SCL on 8 items including Maldives fish.2016 sugar etc. peas. cowpeas.11. SCL on imported semi. 20 per Kg for a period of six months.06. 50 per Kg. The validity period of SCL duty waiver on imported semi. and kurakkan was extended for a period 08.Potatoes to Rs.The validity period of SCL on 8 items including Maldive fish.08. 11. orange.2016 . 20. garlic.04. dates.SCL on vegetable oil was increased by 20 per Kg. dried sprats. was extended for a period of six months. for a period of six months. black gram. chickpeas.2017 Samba rice (red or white) was granted by Rs. 15 per Kg . SCL duty waiver on imported semi. 35 per Kg from Rs.11. 25 per Kg.SCL on six fruit items including mangosteen.25 per Kg The validity period of SCL on 12 items including dried fish. 40 per Kg from Rs. salt etc. SCL on imported maize was re-imposed at a rate of Rs.Raw/ Brown sugar to Rs. was extended for a period of six months.2016 . 10 per Kg from Rs. turmeric etc. black gram. plums etc.2016 SCL on vegetable oil and margarine was increased by Rs. 20 per Kg for a period of six months. 7 per Kg from Rs. Nadu (rice red or white) and Samba rice (red 07. 40 per Kg from Rs. Chapter 05 | Fiscal Developments 11. 5 per Kg . lentils.2017 SCL on vegetable oils was reduced by Rs. 35 per Kg for a period of six months. 75 per Kg from 10 percent or Rs. grapes. from Rs. . peas.2017 or white) was imposed at a rate of Rs. . 25 per Kg from Rs. etc 19.2017 or white) and Samba rice (red or white) was extended for a period of 30 days. green gram. 25 per Kg from Rs.01. 23.2016 Rs. 10 per Kg from Rs.2016 . red onions.01. butter. groundnuts.2017 .milled or wholly milled raw rice (kakulu).2016 SCL on potatoes was increased to Rs.08.SCL on red and yellow lentils was increased as follows.Whole lentils to Rs. apple 02. yogurt.MINISTRY OF FINANCE.08.2016 etc.2016 etc.02.12. 0.25 per Kg from Rs.The validity period of SCL on potatoes and B’ Onions was extended for a period of three months.2016 SCL on B’ Onions was increased to Rs.03.07. . turmeric. pears. 13 20.2016 Special Commodity Levy (SCL) The validity period of SCL on 8 items including Maldives fish.25 per kg .Spilt lentils to Rs. 2 per Kg. 19. oranges.01. 25 per Kg SCL on following items was revised: 30.milled or wholly milled row (kakulu).02. 40 per Kg from Rs.2017 was extended for a period of six months.2016 SCL on white sugar was increased to Rs.SCL on green gram was increased to Rs. SCL on following items was revised: 01. 17. 29. .SCL on sugar was reduced to Rs. 10 per Kg and increased SCL on white sugar to Rs. chillies.milled or wholly milled raw rice (kakulu).2016 basis was introduced.2016 .01. SRI LANKA | ANNUAL REPORT 2016 Effective Measures Date A method for determination of Customs value on disposal of machinery and equipment imported on re-export 23. 15 per Kg from Rs. 5 per Kg from Rs. margarine.11. 30 per Kg for a period of six months. . 0.05. 162 per Kg from Rs.10. 2 per Kg from Rs.03. 7 per Kg. dried orange.09.2016 .2016 SCL on vegetable oil and margarine was increased by Rs. sprats.2016 of six months. yogurt.Whole lentils to Rs.09. sprats. 0. . 21.12.25 per Kg .2016 .

01.2016 The domestic Gas price was reduced by Rs. 08.2017 The maximum retail prices on selected consumer goods were imposed.2016 Construction Industry Guarantee Fund Levy was removed. 5 to Rs.2016 The tax imposed on the leasing of land to foreigners was removed. 25 to Rs.) New (Rs.5 Kg cylinder.07.000 Passports fee Normal service Child 1.) Adult 7500 10. sugar other than white 08.500 5.2016 Vehicle Entitlement Levy was introduced in lieu of Motor Vehicle Importers License Fee.03.2016 Share Transaction Levy was removed. 84 .2016 Share Transaction Levy was re-imposed at the rate of 0.2016 Embarkation Levy rate was increased to USD 30 for both ship and air passengers.01. SRI LANKA | ANNUAL REPORT 2016 Effective Measures Date The validity period of SCL on 6 items including mackerel.04.500 3.02.2016 09 Cents.2017 The maximum retail prices on locally produced and imported rice were imposed.01. 01. Administrative Changes 29. was extended for a period of six months.SAARC visa fee was increased to USD 20 from USD 10. Previous (Rs.2016 The maximum retail prices on selected consumer goods were imposed.2017 Embarkation Levy rate was increased to USD 50 for both ship and air passengers.2016 . Taxes introduced under the Finance Act Chapter 05 | Fiscal Developments The rate on International Telecommunication Operator’s Levy (ITOL) was increased to USD 12 Cents from USD 01.500 2.01. 01. 01. chickpeas. 01. Kurakkan.000 Adult 2. 1. 09.01.321 for a 12.000 Dual citizenship fee 250. 01.2017 sugar etc.000 300.000 Passports fee one day service Child 3.3 percent.01. 01.01. MINISTRY OF FINANCE.000 .01. 17.2017 The maximum retail prices on rice were imposed. Other Levies and Charges 01. 44 Per liter. peas.01.02. 27.01.2017 The retail price of Kerosene was reduced by Rs. 14.01.11.Fees for passport and dual citizenship were increased as follows.

293 127.8 Chapter 05 | Fiscal Developments percent in 2015 mainly due to the decline in both percent in 2015. Expenditure on goods expenditure declined to 14. The recurrent from 3.152 Operational Losses of Public Corporations 12. capital GDP in 2015.456 19.3 1.8 1.771 Welfare Payments and Subsidies 41.730 570.134 317.290.577 173.4 0.498 444.7 percent in 2016 compared to 20.7 1.6 12.3 percent of GDP in 2016 from 1.387 27.701.049 156.293 Interest Payments 356.6 percent of GDP in 2016 and net lending relative to GDP.2016 percent in 2015.757.289 57.819 Pensions 99.053 509. in nominal terms.9 3% 2% 1% percent to Rs.757.3 percent increase.2 Pensions 1.2 percent of GDP in 2016 from 4.858 49. expenditure and net lending as a percentage of GDP declined to 4.7 percent of in non-interest expenditure.8 5.756 52.2 1.4 percentage points to 2016 from 15.426 As a % of GDP Total Recurrent Expenditure 14.747 393.854 21.396 162.007 436.802 36.682 123.024. Salaries & wages Interest payments Other Goods & Services 10% Recurrent Expenditure Pensions Welfare payments and subsidies Fertilizer Subsidy The total recurrent expenditure. Meanwhile.9 increased to 5.761 Goods & Service 132.336 140.571 27.227 610.2 percentage from 5.9 billion in 2016 from Rs.2 4.701.2 0.9 4. 2.6 4.333.5 14. the total Government expenditure expanded by 1.6| Composition of Recurrent Expenditure .999 11.181 1.5 percent in 2015 due to the decline 1.1 0.4 4.022 366.8 billion.364 Fertilizer Subsidy 29.0 12. in nominal terms.3 1.6 1. 8% 32% 2.3 0. SRI LANKA | ANNUAL REPORT 2016 5.985 69.8 o/w Salaries & Wages 4.131. 1.15| Recurrent Expenditure of the Government Rs.652 184. 1.076 Domestic 288.906 1.954 148.601 347.4 billion in 2015. However. Item 2011 2012 2013 2014 2015 2016 (a) Total Recurrent Expenditure 1.5 Losses of Enterprises 0.5 Sources: Department of State Accounts and Department of National Budget (a) Provisional 83 .3 Government Expenditure non-interest expenditure. Expenditure on salaries and wages as a percentage of GDP declined The total Government expenditure and net by 0.8 percent of GDP in and services declined by 0.1 percent in 2015 while interest payments points to 19.9 percent in 2016 from 5.1 4.8 15. Assistance to other Statutory Bodies Losses of Public Corporations was Rs.659 343.324.086 119.8 Goods & Service 1. compared to Rs.2 Assistance to Other Statutory Bodies 0.782 Salaries & Wages 319.657 1.9 percent in 2015.4 0.8 percent of GDP lending to GDP ratio declined by 1.895 Foreign 68.465 450.3 percentage points to 4.281 151.982 561.004 140. Expenditure on subsidies and recurrent expenditure and capital expenditure transfers declined to 3.7 4.3 5.395 527.0 4.4 0.565 90.979 39.706 31.2 13.7 billion recorded in 2015 35% reflecting the overall increase in both interest and Table 5.961 111.021 1.4 0.229 440.407 46. Mn.930 77.854 1.008 54.2 1.4 Chart 5.676 39.1 4. a 3.927 29.839 100.120 Operational Support to Statutory Bodies 32.817 13.3 Interest Payments 4.577 46.6 1.2 0.MINISTRY OF FINANCE.174 101.4 1.4 1.164 34.4 0.699 408.205.1 0.

601 347.5 percent from Rs.633 61. .72 9.6 percent 173.07 2015 Jun 6.7 billion in payments increased by 13. Interest payments amounted to 34.50 9.829 Police and Public Security 33. 256.78 7.5 percent of total recurrent expenditure and was the The expenditure on salaries and allowances for second large item in the recurrent expenditure.677 44.89 .18 . 86.9 percent. 8.76 .00 -228.58 11.90 9. The expenditure billion in 2016 while foreign interest payments on social welfare amounted to Rs.0 2016 Mar 8. .230 440. 101.810 180.11 11. 9.62 10.9 billion in 2016. to Rs.217 105. It was a 32. - 2015 Mar 6.789 150. Domestic interest moderately by 1. .0 129.491 184.55 9.8 billion in 2016 from Rs.55 6.295 141.89 Sources: Department of Treasury Operations and Department of Public Debt 84 . an increase Welfare Expenditure of 15. Interest payments on domestic and foreign debt accounted to Rs.00 .035 121.76 2016 Dec 8.730 570. . .88 9. 570.0 .00 344.98 12.00 287.856 Provincial Councils 90.76 10. .84 6.11 6.740 Defence 112. 156.950 134.18 9.1 billion as 2016.62 10.223 133. 11.64 11.138 176. 527. 8. - 2014 Dec 5.00 2017 Mar 9. Chapter 05 | Fiscal Developments and national security increased by 1.93 11. 40. This moderate growth was mainly due pensioners coupled with the increment of basic to the increased overtime and other allowances salaries of public sector employees.17 | Behaviour of Yield Rates Treasury Bills (%) Treasury Bonds (%) Period 91 days 182 days 364 days 2 year 3 year 4 year 5 year 2014 Sep 6.04 11. 8.83 7.00 303.15 6.01 .16 2015 Sep 6.00 197.796 143. the Government sector employees including those who are in the Provincial Councils (PCs) The total pension payments increased to Rs.471 61. Sector 2011 2012 2013 2014 2015 2016(a) Central Government 83. 610. . from Rs.68 6.0 percent to Rs. 232.0 99.00 -201. an increase of 10.45 6.70 7. MINISTRY OF FINANCE. - Change (Basis Point) -180.965 113.336 Total 319.39 10.70 .072 95.30 .7 billion This increase was mainly due to the increased in 2015.74 5.94 - Change (Basis Point) 227. Mn. .3 percent to Rs.2 billion in 2016 from Rs.0 billion in 2015.6 billion in 2015.008 36.42 11. 12.00 2016 Jun 8. SRI LANKA | ANNUAL REPORT 2016 Personal Emoluments and Pension with effect from 01st January 2016.63 10. 509.18 8.982 561.63 10.8 2016 from Rs. .818 88.15 8.16 | Salaries and Allowances of the Government Rs.28 6.703 126.55 11.00 434. with the implementation of new salary structure Table 5.79 Change (Basis Point) 71.07 7.86 10.2 billion in 2015.91 9.584 172. 40.78 13.8 percent of Expenditure on Samurdhi programme enhanced total recurrent expenditure.615 40.761 Sources: Department of State Accounts and Department of National Budget (a) Provisional Interest payments most of the loans have started to service after their grace period.61 11.00 280.30 .75 12. .747 393.23 5.3 Table 5.75 11.5 billion in increased by 31.21 6.17 .9 percent to Rs. 561.58 2015 Dec 6. .89 2016 Sep 8.

740 the efforts made by the Government to target Assistance to Differently Abled Soldiers 26.3 billion in 2015. Chapter 05 | Fiscal Developments Rs.772 subsidies for the neediest people. 50.771 Source: Department of State Accounts and Department of National Chart 5. Reflecting the Food Assistance (with WFP assistance) 764 rationalization of the school uniforms provision. Item Amount The expenditure on health and nutrition increased Health by 21.8 billion NBT revenue collection. The School Uniforms 2.712 million was in 2015. 4 60 1. 49. Rs.0 percent and Poshana Malla increased by Thriposha Programme 1.141 from Rs.157 expenditure on school textbooks increased by Mahapola & Bursaries etc. The public investment addition. Pension Payments % of GDP Amount (Left Axis) % of GDP (Right Axis) Public Investment 5.6 billion incurred in 2015 reflecting Welfare Support Samurdhi Cash Income Support 40. the social security education and health. 602. out of Rs.9 percent to Rs.5 percent to Rs.6 Livelihood and Production percent to Rs. The expenditure on medical Infant Milk Food Subsidy & Fresh Milk 318 supplies for Government hospitals increased by Poshana Malla 5.7 percent.028 41.0 180 Chart 5. Free Medicine 38. Meanwhile. 28. Rs. 13. 27. The expenditure on pension and communication.746 20. 10.MINISTRY OF FINANCE. agriculture and irrigation. Bn. 0.0 percent to Rs.351 137.2 percent. SRI LANKA | ANNUAL REPORT 2016 billion in 2015.0 percent in 2016 from 5.4 Financing Provincial Councils (PCs) The expenditure on public investment.1 billion in 2015. water supply and power for differently-abled soldiers increased by 13. In percent recorded in 2015.8 billion in 2016 Livelihood Support Programme 1.9 and energy etc. 15. 594.5 arrangement with the Central Government.8 | Public Investment 160 2.585 million was transferred to was directed towards sectors such as transport PCs. the expenditure on Education education increased by 13.0 percent in 2016. % 80 300 Rs.0 billion in 2016 from Rs. Mn. School & Higher Education Season Tickets 1. The public investment as a parentage transferred to PCs under the revenue sharing of GDP declined to 5.5 10 140 600 9 2. financial support for elders increased by Table 5.2 billion in 2016. increased by 10.5 0 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 Prov.1 billion in 2016 from Rs.415 billion in 2016 from Rs. Flood and Drought Relief 132 expenditure on the uniforms declined by 4.136 million of the total Rs.998 School Nutritional Food Programme 3. 2.0 200 3 2 40 100 1 0. in 2016 to support their devolved activities 85 .18 | Expenditure on Key Welfare Programmes: 2016 12.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Prov.7 | Pension Payments Budget 3.1 School Text Books 5.916 Expenditure on fertilizer subsidy significantly Divinaguma Back Yard Economy declined by 44. percent. Fertilizer Subsidy 27.5 percent to In 2016.6 percent. 1. in nominal terms.0 500 8 120 7 100 400 6 1.5 % of GDP 5 Rs. declined marginally by 1.590 39. 86. Bn.

556 Agriculture and Irrigation 28.447 80.326 28.769 7. Net Government amounted to Rs.0 billion. recurrent expenditure of the PCs increased by 7.029 19.2 billion) continued as Gross foreign borrowings increased by 3. amounted to nearly Rs.2 billion in 2016 from Rs.960 8.19 | Public Investment Rs.621 24.1 billion in 2016.794 Total 422.920 22.351 36.447 57.267 17. foreign borrowings increased by 16. profits.136 27.782 58. -35.930 31. 200. 574.886 61. 77. MINISTRY OF FINANCE.3 billion and the total foreign borrowings and the balance.6 27.5 8. PCs = Provincial Councils 86 . 231.186 85.079 Chapter 05 | Fiscal Developments Health 14. The PCs own revenue generating from liquor license fees.013 13.1 percent to Rs.668 26.283 38.1 billion in 2016 from Rs. Stamp duty and motor vehicle 5. **Since 2011.236 Transport and Communication 190.230 34.099 54.954 23.022 42.499 39.2 transfers to PCs in 2016.6 27.598 87.252 37.631 40.124 Other 24.3 billion in Furthermore.333 39.502 67.5 8. 829.20 | Performance of NBT.480 25. 33 percent revenue of PCs including transfers by the Central was financed by domestic borrowings. the Table 5.2 billion in 2015.515 58.5 Deficit Financing license fees increased by 18 percent to Rs.122 3.282 44.173 3.044 14. 4.297 97. Mn. 67 percent was financed by charges amounted to Rs.2 Source : Department of Fiscal Policy * Since 2011. and foreign grants for special projects (Rs.363 55.0 percent to Rs.0 billion.0 2.398 177.816 945 1.204 486. ***Data represent 70 percent of the revenue collected by the central government from Motor Vehicles Registration Fee and transferred to PCs Note: CG = Central Government.198 27.982 50.026 204. 13. In 2016.473 66.004 22.721 57.506 57.9 Total 46.2 percent to Rs.027 Housing and Common Amenities 7.811 19.012 Sources: Department of National Budget and Department of State Accounts under the tax sharing mechanism.813 28.120 44.314 55. 33 1/3 percent of the revenue collected from the NBT by the Central Government is transferred to Provincial Councils.013 .066 39. Mn. 8.5 Stamp Duty** .534 Police and Public Security 3.155 19.499 84.552 Community Service 19.2 billion in 2016 from Rs.768 80.565 31. 166.3 year.0 billion in 2016 from Rs. 2015 2016 % Change 2016/2015 Item CG PCs Total CG PCs Total CG PCs Total NBT * 45. SRI LANKA | ANNUAL REPORT 2016 Table 5. 211.300 443. Non-tax revenue collected by the PCs in billion in 2016 from Rs.279 2.9 -28.463 . Stamp Duty and Motor Vehicle Registration Fees Rs.014 7.5 billion in 2015.2 39.768 594.6 Domestic 28.984 4.1 15.882 7.593 8.031 -28.973 481.800 36. Out terms of interest.471 239.279 199. The transfers to PCs percent to Rs.610 602. province-specific development 460. 1. 5. 640. block grants to meet expenditure 2015 while net domestic financing declined by on salaries (Rs.617 30.0 billion).424 28.263 909 2.823 8.2 39.539 210.0 -35.463 8.712 86. grants (Rs. 369.727 31.338 3.4 billion). 33.0 billion). Item 2011 2012 2013 2014 2015 2016 (Provisional) Education 22.794 17.630 26.440 18.517 51.9 -28. 429.141 17.633 Energy and Water Supply 83. (Rs.2 Import 16.544 39.477 Civil Administration 28. 100 percent of the revenue collected from the stamp duty by the Central Government is transferred to Provincial Councils. 28 billion in the previous The overall budget deficit contained to Rs.105 7.0 Motor Vehicle Registration Fees*** 1. dividends and sales and of the overall deficit. 28.395 9. criteria based grant 54.

4 Non Tax 122.2 13.7 4.652 -449.6 0.6 0.2 0.6 0.8 15.341. financing recorded in 2016 and depreciation of the rupee from domestic banks recorded a net repayment despite lower net borrowings in 2016.9 1.6 0.929 40.205.0 11.3 percent in Treasury bonds recorded a net repayment of Rs. - Source: Department of Fiscal Policy (a)Provisional 87 .131.5) (640.5 0.6 0. Meanwhile.0 12.3 425.5 0.5 0.5 0.1 77. Financing from non-bank sources 5. % of GDP Chapter 05 | Fiscal Developments Item 2011 2012 2013 2014 2015 2016 (d) 2010 2011 2012 2013 2014 2015 2016 (d) Total Revenue 1.9 billion in 2016 compared to the net Government debt.1 Budget Deficit (450.155 196.1 0.4 1.6 59.894 -415. However.5 billion in 2015.0 1.356.5 2.7 13.7 10.3 14.4 10.5 12. on net basis.6 -5.22 | Domestic Financing of Budget Deficit Rs.798 .9 9.6 Government Debt accounted to Rs.575 Gross Borrowings 484. 4.3 5.9 60.1 billion in 2016 bank sources.1 Provincial Councils (a) 41.5 1.7 908.554 -187.6 0. SRI LANKA | ANNUAL REPORT 2016 556.0 5.2 473.187.863) Other Borrowings (Net) -4.3 0.3 7.8) (516.6 0.4 1.2 12.291 308. 40.9 Grants 15.5 0.7 1.967 (120.4 Government (b) 1.770.067.9 15.1 66.7 11.701.8 4.1 0.1 0.463.370 574. such as Employees’ from Rs.527 296.21 | Consolidated Budget Rs.5 131.9 21.5 0.7 41.0 20.0 0.4 Sources: Department of National Budget and Finance Commission (a) Includes transfers from Government (b) Includes transfers to PCs (c) Represents expenditure incurred by PCs using their own funds and tax revenue transfers from the Government (d) Provisional Fund (ETF).9 46.5 0. The domestic Table 5.5 464.000 -13.0 billion in 2015.8 17.4 18.0 1.MINISTRY OF FINANCE.5 0.6 1.0 19.9 -5.7 1.6 12. 2016 from 77.719. 9.6 13.2 1.757.2 1.171 70.7 1.527.5 billion compared to the net borrowing of year due to the lower nominal GDP growth Rs.541 (66.795.7 -7. 223.1 15.4 12.050.334.984 82. Mn.737 398.6 7.6 Non Tax 6.6 59.8 Capital and Net Lending 408.005.9 1.0 0.116.0 1.4 0.1 0.263.0 13.0 588. increased borrowing of Rs.8 20.1 53.3) -8.9 17.249 Repayments -439.024.6 12.6 0.4 4. 884.204 448.2 49.1 0.4 billion in 2015.8 1.0) (591.795 781 222.556.6 billion in 2016.6 1.6 7.2 45.6 144.2 13.4 1.5 5.7 576.3 billion at the end of 2016 from Rs.5 0.290.0 1.3 1.5 0.5 20.6 0.0 1.1 0.2 0.3 20.0 1.9 2.6 13.0 7.4 1.9 17.3 Tax 845.1 0.6 0.Bn.2) (488.502 460.474. 66. in nominal terms.8 12.4 -5.1 6. the foreign investment in Treasury bills and The debt to GDP ratio increased to 79.0 2.5 0.669.0 -6.433.1 77.6 6.2 49.068 105.5 0.7 0.5 1.2 0. Provident Fund (EPF) and Employees’ Trust Table 5.414 265.6 5.355.3 0.8 14.9 1.855.5 10.245 211.4 1.2 1.4 0.516) Bank Financing (Net) 191.9 Provincial Councils (c ) 41.7 Recurrent 34.2 142.119 Foreign Investment in Treasury Bills and Bonds (Net) 25.6 Capital 6.441 -588.9 1.1 16.186 379.9 -6.425 671.8 billion.1 Total Expenditure 1.387.503.024. 13.204.1 billion in 2015.9 4.2 billion at the end of 2015 with a domestic debt of Rs.4 2.709 556.7 Tax 34. Repayment of the foreign The major source of domestic financing was non- borrowings amounted to Rs.6 7.1 0.0 49.693 55.6 0.5 billion and foreign debt of Rs.196 Non.6 14.2 12.0 Government 983.7 1.0 49. 8.5 20. by Rs.065 486. 145.9 19.1 66.8 0.3 3.7 Recurrent 1.4 17.7 1.153.5 69.8 3.411.1 0. Item 2011 2012 2013 2014 2015 2016(a) Total Domestic Financing (Net) 256.6 52.0 0.045.4 6.1 0.1 0. The total of Rs.363 .Bank Financing (Net) 44.1 billion to Rs. 5.6 59.850 131.1 222.1 12.066 714.977 126.460.5 14.322.8 99.4 17.605. 398.1 0.1 5.9 1.693.3 11.4 0.203.113 -145.6 percent recorded in the previous 120.1 0.9 1.5 0.5 69.1) (829.6 14.7 42.

and 34.1 Multilateral 183.9 1.9 935.0 Total Foreign Debt 3. billion.0 794.277.000 2.0 48.9 220.000 55 5.0 4.6 Provisional Advances from the Central Bank 143.164.3 Other 102.897.9 | Government Debt Chart 5.0 105.1 3.1 percent China. 142.0 1.8 billion.045.1 318.959. 45 Rs.8 4.4 percent.3 968. Bn.622.609. the outstanding debt to Japan. MINISTRY OF FINANCE.000 % Rs. respectively.6 Bilateral 273.000 30 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 Domestic Debt % of GDP Domestic Debt Foreign Debt 88 . in the Development Association (IDA) was Rs.000 4.6 billion and Rs.2 Other 46.3 percent and 32.1 Treasury Bonds 2.8 Concessional Loans 1.5 572.814.1 1.6 bilateral category.2 913.341.9 199.2 779.305.7 Multilateral 704.1 83.000 1. compared to 45.1 62.544.5 Medium & Long Term 3. 417.3 Sources: Department of External Resources and Department of Public Debt of Central Bank of Sri Lanka Chart 5. the outstanding debt respectively recorded at the end of 2015.7 Non-concessional Loans 1.3 Market Borrowings 1.2 percent.844.373.000 50 4.2 3.000 5.6 4.387.714.7 billion while that to International Chapter 05 | Fiscal Developments In terms of donor-wise debt calcification.000 35 1. Table 5. to Asian Development Bank (ADB) amounted to Rs.000 6.0 Bilateral 786.000 40 2.9 8. 569.4 1.045.491.503.1 24.5 104. 486. In the multilateral category.5 856.2 5.9 151.3 Total Government Debt 7.113.8 Sri Lanka Development Bonds 391.1 Rupee Securities 55.8 658.148.5 1.729.041.1 668.000 3. 131. respectively at the end of 2016 Rs.390.307. and India amounted to Rs.23 | Total Government Debt Rs.336.5 Short Term 941.5 24.1 2.10 | Domestic Debt 6.8 307.1 3.2 9.1 1.3 billion.9 4. Bn 3. Bn Item End 2014 End 2015 End 2016 Total Domestic Debt 4. SRI LANKA | ANNUAL REPORT 2016 and foreign debt to GDP ratio was 45.4 Treasury Bills 694.

The total debt service 247.329.447 India 11 142.816 Treasury Bills Non Resident Investments in was on interest payments.642 Other 38 89.431 2016 from 11. Term Loan 1 104.12 | Foreign Debt Treasury 4.0 Memo: Total Foreign Debt 2.0 100.4 19.25 | Currency Composition of the Government Foreign Debt 2016.000 40 2.3 in the medium-term.11 | Composition of Domestic Debt . Bn.7 20.2016 Chart 5.9 34.0 22. The continued fiscal consolidation process (%) Currency 2011 2012 2013 2014 2015 2016 coupled with improvements in the Government SDR 25. Japan 101 486.4 3. 25% ADB 164 569. Billion) Sources: Department of External Resources and Department of Public Debt of Central Bank of Sri lanka Note: Loans received by State Owned Enterprises also included 89 .0 100.000 % Rs.6 24.500 Chapter 05 | Fiscal Developments 35 2.3 2. the total debt service payments increased International Sovereign Bonds 9 1.3 5.8 16.6 percent to Rs.186 Multilateral 323 1.076.767.0 4.2016 Source Loans (Rs.4 14.5 48.9 percent in 2015.9 54.500 50 Bonds 69.785.2 4.1 52. SRI LANKA | ANNUAL REPORT 2016 Chart 5.113.820 28% Commercial.0 100.614 47% Germany 15 39.6 5.500 30 1.143 France 30 24.6 operations will help contain the debt service ratio Japanese Yen 24.544.220.000 25 Rupee 500 Securities 20 0.8 percent was for repayments Non Resident Investments in while the balance 45.1 4.6 percent in 2015 due to the increase in Government revenue in Table 5.2 percent from 90.24 | Foreign Debt by Source 2016 Number of Amount Chart 5.MINISTRY OF FINANCE.0 100.8 24.1 30.352.7 debt management and the Treasury cash flow US Dollars 29.1 3.8 (Rs.280 Saudi Arabia 7 13.222 Treasury Bonds payments to GDP ratio declined to 11.689 IDA 121 417. China 4 131.3 6.3 6.5 Other 14.7 18.870 by 2. 1.6% 4.13 | Foreign Debt by Source . The debt service Sources: Department of External Resources and Department of Public payments as a percentage of Government revenue Debt of Central Bank of Sri Lanka * Excludes outstanding foreign debt of SOEs declined to 80.5 billion or 54.553 Bilateral.747 Multilateral.9 Total 100.7% Foreign Debt % of GDP Table 5.401 In 2016.045.8 12.7 Debt Service Payments Export Credit * 92 437.000 45 3.4 percent in Total 753 3.4 13.500 3.960.221 5.5% Treasury Sri Lanka Development 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bills Other Bonds 14. 610.3 12.257 Other 160 108.9 billion 12.2 percent or Rs.3 2.5% 4.0 9.7 17. Euro 6.0 100.860 741.1 20.4 billion of which Rs.Mn) Bilateral 328 945. 1.7% 10.

0 36.2 Foreign Debt Service/ Export Earnings and Remittances 9.0 632.9 38.9 77.3 1. SRI LANKA | ANNUAL REPORT 2016 Table 5.8 Chapter 05 | Fiscal Developments Foreign 68.7 70.3 77.9 40.4 12.11.017.2 14.373.9 billion and Rs.0 41.6 659.1 10.0 40. Department of Treasury Operations and Department of Public Debt of Central bank of Sri Lanka 90 . dated 29.8 102.076.8 37.7 12.0 183.1 Total 895.4 305.5 1.2 610.8 101.2013 and shown under pulic investment in the economic classification.5 Total Interest/ Government Revenue 36.5 284.8 264.7 37.1 68.5 204.27 | Government Debt and Debt Service Indicators (Percentage) 2016 Indicator 2011 2012 2013 2014 2015 Provisional Total Debt/GDP 71.6 16.2 27.6 79.0 436. 18.0 700.0 733.9 30.1 Repayments 538.9 415. 230/2013.2 Sources: Department of External Resources.2 Debt Service/GDP 12.2 101.9 11.8 71.0 32.2 billion of interest paid respectively in respect of the ongoing public investment projects which have been capitalized as per the State Account Circular No. Bn.7 23.1 839. Item 2011 2012 2013 2014 2015(b) 2016 Provisional Interest(a) 356.4 527.0 298.3 1.3 45.5 Domestic 439.8 193.6 14.5 96.3 246.7 30.0 69.7 846.7 343.4 Foreign 98.0 366.1 29.3 Domestic Debt/GDP 38.2 90.0 449.1 90.8 11.5 450.109.8 408. MINISTRY OF FINANCE. (a) 2013 and 2014 numbers include Rs.4 27.5 444.26 | Government Debt Service Payments Rs.2 Sources: Department of Treasury Operations and Department of Public Debt of Central bank of Sri Lanka.3 31.5 1.4 11.1 35.9 Domestic 288.7 90.4 11.144.1 187.5 1.6 Domestic Interest/ Recurrent Expenditure 28.7 609. Department of State Accounts.4 496.4 34.106. 7.3 596.1 317.1 Foreign Debt/GDP 32.352.3 45.0 1.4 Domestic 728.0 777. (b) Revised Table 5.4 741.0 509.1 145.6 1.6 80.2 Foreign 167.2 28.4 Debt Service/Revenue 92.

MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

Chapter 06 | Expenditure Review
Expenditure
Review 06

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MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

6.1 Overview Table 6.1 | Schedules in Appropriation Act
Expenditure of
The total estimated
General Services of
First Schedule expenses was Rs.
the Government by
2,507 billion.
The prudent expenditure management programme
conducted by the Government created extra Expenditure of
the Government,
Chapter 06 | Expenditure Review

fiscal space in 2016. This was achieved with Second authorized by law
Estimated
expenditure was Rs.
the rationalization of recurrent expenditure Schedule and to be charged
1,192 billion
on the Consolidated
and streamlining capital expenditure. Several Fund.
measures were implemented by the Government Expenditure related Contribution from the
to curtail the expenditure Overall expenditure Third Schedule to Advance Account Government budget
Activities. was Rs.5 billion
as a percentage of GDP declined to 19.7 percent Source : Department of State Accounts/ Department of National
in 2016 from 20.9 percent in 2015 mainly due to Budget
the decline in recurrent expenditure and capital
expenditure and net lending. The decline in Accordingly, the total expenditure of the
non-interest expenditure including subsides and Government as specified in the above three
transfers, goods and services had a impact on the schedules was Rs. 3,704 billion for 2016.
drop of recurrent expenditure. However, interest
payment increased to 5.2 percent of GDP in 2016 6.3 Borrowing Limits
from 4.8 percent of GDP in 2015. Reflecting the
prioritization of public investments, the public Section 2 (1) (b) of the Appropriation Act
investment as a percentage of GDP declined to stipulates the maximum borrowing limit of
5.0 percent in 2016. the Government for financing the estimated
expenditure of the Government for the respective
With the attempts of facilitating the drastic year. Under the Appropriation Act, No 16 of 2015,
changes of the administrative structure of the the total amount of loan proceeds authorized to
Government in 2015, the progress in 2016 was be raised during the financial year 2016 was Rs.
quite favorable in the area of public expenditure 1,699 billion. This limit remained unchanged
management. However, pressure from the even when the Appropriation Act was revised.
external sector proved critical due to continued
increase in exchange rates throughout the year 6.4 Amendments to the Appropriation
which resulted in a drastic increase of public Act, No.16 of 2015
expenditure. This was increased the quantum of
the expenditure, especially in debt servicing, i.e.
The prevailing system for the allocation of
interest payment and repayment of loans.
budgetary provisions for Provincial Councils
(PCs) under separate expenditure heads
6.2. Appropriation Act for 2016 was overturned in 2016 including budgetary
The Appropriation Bill for the year 2016 was provisions for all PCs into the expenditure
presented to Parliament on 23rd October 2015 and head of the Ministry of Provincial Councils and
it was passed by Parliament on 19th of November Local Governments when implementing the
2015 as the Appropriation Act, No 16 of 2015. Budget 2016. Due to the procedural issues and
administrative bottlenecks of this present system,
PCs continually requested to revise the process
Appropriation Act included three schedules,
and to implement the system that prevailed
namely the first schedule, the second schedule
until 2015. Acknowledging these requests, the
and the third schedule. Each schedule includes
Cabinet of Ministers has decided to reverse the
the following expenditure as shown in Table 6.1.
process by amending the Appropriation Act,
No. 16 of 2015 creating an Expenditure Head for
each Provincial Council. Accordingly, the draft
Appropriation (Amendment) Bill was published

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MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

in the Government Gazette on 15.07.2016 and by Parliament on 2016.09.20, the Expenditure
submitted to the Parliament for approval. Head No. 147 was created for the Ministry of
Regional Development and Special Warrant
Further, as a measure of correcting the issue No.02 was issued by the Minister of Finance,
raised by the Auditor General on the Financial enabling to release imprest for expenditure

Chapter 06 | Expenditure Review
Statements of the Government, actions have earmarked in the Supplementary Estimate.
been taken to amend the Section 2. (1) (b) of
the Appropriation Act to revise the system of 6.6 Funds Withdrawn from the
reporting practiced during last decades. This Contingency Fund
amendment was made as a Committee Stage
Amendment to the Appropriation (Amendment) In the absence of an Expenditure Head for the
Bill for 2016. newly created Ministry of Regional Development,
an advance of Rs. 15 million was withdrawn from
the Contingencies Fund, in terms of the Article
Endorsing the above changes the Appropriation
151(2) of the Constitution as an interim measure,
(Amendment) Bill was approved by Parliament
adhering to the procedure stipulated in the
as the Appropriation (Amendment)Act, No. 23 of
Financial Regulation No. 78. Advances drawn
2016 while all the estimated Revenue, Expenditure
from the Contingencies Fund for a designated
and Budget Deficit remained unchanged.
purpose should be settled before the end of the
financial year by submitting a supplementary
6.5 Supplementary Estimates
estimate to Parliament. The said amount was
The Minister of Finance submitted a settled through the Supplementary Estimate
Supplementary Estimate to Parliament for submitted by the relevant Ministry.
settling the advance of Rs. 55 million drawn
from the Contingencies Fund in 2015 in order 6.7 Special Law Warrants as
to facilitate the 11 Ministries established by the Supplementary Allocation
extraordinary Gazette No. 1909/20 dated 06th
April 2015 and Gazette No. 1909/54 dated 10th If there is any additional fund requirement for a
April 2015. Thereafter, Special Warrant No.01 purpose that has been referred to in the Special
was issued by the Minister of Finance enabling Law Services, in Schedule 2 of the Appropriation
them to report the expenditure incurred using Act during the year, the Minister of Finance shall
the said advance which has been withdrawn issue a supplementary special law warrant on
from the Contingencies Fund in 2015 referred in the Form of Treasury 77 authorizing the release
the Supplementary Estimate. of money from the Consolidated Fund. As such,
nine (9) special law warrants have been issued in
2016 as follows.
Similarly, the Ministry of Regional Development
was established on 18th March, 2016 by
6.8 Budgetary Performance in 2016
appointing a Minister of Regional Development
by the Extraordinary Gazette No. 1958/72. As
The total actual expenditure for 2016 was Rs. 3,106
this Ministry did not exist during the period
billion compared to the estimated expenditure of
of Budget formulation for the year 2016, a
Rs. 3,699 billion, Rs. 98 billion lower than the total
Supplementary Estimate was submitted to
expenditure incurred in 2015. The total utilization
Parliament as a measure of providing an
of budgetary provisions was 84 percent in 2016,
expenditure head to this Ministry. Following the
a 12 percent less than the performance in 2015.
procedure stipulated in Financial Regulations 74,
This was partly due to the bills in hand worth
75 and 76, the Minister of Regional Development
of Rs. 82 billions as at end of 2016 by spending
submitted a Supplementary Estimate of Rs.
agencies. If this amount was paid, the actual
592,925,000 (Recurrent - Rs. 469,425,000 and
expected expenditure utilized would have been
Capital - Rs. 123,500,000). When it was approved
86 percent.

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MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

supply services) only 69 percent was utilized
Out of the provisions authorized under the Section
during the year.
2 (1) of the Appropriation Act (expenditure on

Table 6.2 | Special Law Warrants Issued In 2016
Chapter 06 | Expenditure Review

Authority

Amount
No

Expenditure Purpose /Objective
(Rs).

Head Institution
To pay the revised pension amount of former President Ms. C.B.
1 1 H.E. The President 870,000
Kumarathunga, as per the resolution passed by Parliament.
2 20 Election Commission To pay the remunerations of the members of Election Commission. 800,000
To pay the remunerations of the members of Public Service
3 6 Public Service Commission 5,670,000
Commission.
To meet the shortfall of provisions provided for the payment of
4 253 Department of Pensions 7, 585,000,000
W&OP
5 8 National Police Commission To pay the remunerations of the members of Police Commission. 7,100,000
Commission to Investigate
6 10 Allegations of Bribery or To pay the remunerations of the members of the Commission. 1,300,000
Corruption
To meet the shortfall of provisions provided for the payment of
7 253 Department of Pensions 270,000,000
W&OP
Department of Treasury
8 249 To meet the shortfall of provisions allocated on debt servicing 179,270,670,000
operations
Department of Treasury To meet the shortfall of provisions on debt servicing due to change
9 249 12,090,339,859
operations of accounting policy of the Treasury Bills and Treasury Bonds
Source : Department of State Accounts/ Department of National Budget

The expenditure estimates under special law Table 6.3 | Utilization of Budgetary Provisions 2015-2016
Rs. Bn
(Financing code 21) has also shown an overrun of Expenditure 2015 2016
Rs. 196 billion against the initial estimation of Rs. Category Budget Expenditure Budget Expenditure
1,192 billion. This was basically due to the increase Appropriation 2,101 1,849 2,507 1,719
Act
in debt servicing, both repayment and interest
Programme - 1 1,085 1,102 1,021 988
payment of domestic and foreign loans and pension Programme - 2 1,016 747 1,486 731
payments. The policy prevailed in reporting cash Special Law 1,237 1,354 1,192 1,388
based accounting treatment for Treasury Bills and Services
Total 3,338 3,203 3,699 3,106
Treasury Bonds has been revised to the face value
Source : Department of State Accounts
of the Treasury Bills and Treasury Bonds which
contributed to this significant change in debt Table 6.4 shows the source of financing of the
servicing. Government expenditure for 2015 and 2016.

Table 6.3 indicates the summary of utilization of Table 6.4 | Financing Source of Government Expenditure
budgetary provisions in 2016 compared to 2015. Rs Bn
Financing
Financing Source 2015 2016
Code
11 Domestic Funds 1,545.2 1,466.6
12 Foreign Loans 252.5 205.4
13 Foreign Grants 5.5 6.9
14 Reimbursable Foreign Loans 1.7 2.7
15 Reimbursable Foreign Grants 0.1 0.2
16 Counterpart Funds 0.5 0.3
Foreign Finance Associated
17 43 36.3
Local costs
21 Special Laws 1,354.5 1,387.6
Total 3,203.0 3,106.0
Source : Department of State Accounts

94

MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

The amount received as foreign grants increased 6.10.2. Supplementary Support Services
by Rs. 1.4 billion. However, the disbursement and Contingent Liabilities
ratio of the foreign grants is still only a 50 percent
The Supplementary Support Services and
against the estimated amount.
Contingent Liabilities Project under the

Chapter 06 | Expenditure Review
Expenditure Head 240, Department of National
6.9 Advance Account Activities
Budget was implemented in 2016 for facilitating
Actual expenditure of the Advance Account the unforeseen urgent additional fund
activities was Rs.19.75 billion against the estimate requirements.
of maximum expenditure of Rs. 24.55 billion.
The total provision of this project in 2016 was
The actual total receipt was Rs. 22.65 billion
Rs 623.3 billion, including the provision for
against the estimate of minimum receipt of Rs.
implementation of budget proposals for 2016 of
19.55 billion. Accordingly, the Advance Account
which Rs 246.8 billion has been reallocated to
activities were within the approved limits of
relevant spending agencies as supplementary
Appropriation Act, No.16 of 2015. Activities
allocations on the basis of need assessments,
under the Advance Account included activities of
undertaken by the Department of National
commercial nature as well as advances to public
Budget. All supplementary allocations have
servants excluding the property loan interests.
been provided in line with the specific guidelines
The total advances given to the public servants
specified in the printed Estimates for 2016. A
was Rs. 13.86 billion.
summary of the allocations is given in Table 6.5.

From the year 2005, property loans and vehicle Table 6.5 | Summary of re-allocated fund from
Supplementary Support Services and Contingencies Liabilities
loans for the public officers have been made Amount
Purpose as per the Printed Estimates
through the State Banks. During the year, Rs.11.75 ( Rs. Mn)
billion have been released for 12,649 Government Provisions for payment of salary increases
servants as property loans by the State Banks and proposed in the budget speech, rectification
1 of salary anomalies, new recruitments and 7,317
the Government has subsidized Rs.2.47 billion as other related payments and Increase in Public
loan interests. Sector Pensions
Provisions to meet additional expenditure
and liabilities arising from changes
6.10 Public Expenditure Management 2
underlying assumptions based in the
36,715
preparation of budget estimates
6.10.1 Transfer of Funds 3
Provisions for implementation of budget
110,537
proposals
Provision to meet any short-fall in capital
As per the Section 5 of the Appropriation Act expenditure of development projects funded
No.16 of 2015 as amended, the General Treasury 4 through external financing and related 92,303
counterpart -funding requirement inclusive of
granted approval to reallocate or transfer payment of taxes and duties
unutilized provisions within the total expenditure Total 246,872
limit approved by Parliament, following the Source: Department of National Budget(Budget Estimate (Approved
procedures specified in financial regulations and by Parliament) 2016)
printed Estimates. In this process, transfers or
reallocation of budgetary provisions, allocated A report containing the amount of provisions
for recurrent expenditure, which have not been transferred and the reasons for such transfer,
utilized or not likely to be utilized, to recurrent or was submitted to Parliament within two months
capital expenditure within the same programme; of the date of the said transfer made, in terms of
or to capital expenditure in any other programme Section 6(1) of the Appropriation Act. In addition,
within the same head of expenditure have been details of all transfers made out of this provision
allowed. Similarly, transfer or reallocation of was incorporated into the Government Fiscal
capital expenditure which has not been utilized, to Management Report 2016 published as per the
capital expenditure within the same programme Fiscal Management (Responsibility) Act, No. 3 of
have also been considered.

95

MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

2003. Finally, actual utilization is reported under National Budget Circular No. 1/ 2016 regarding
the relevant expenditure heads and object codes the procurement of vehicles under OLM. As per
in printed Estimates for the following year. the instructions given by the above guidelines,
the Department of National Budget has granted
6.10.3 Circulars Issued for Managing approval to obtain 160 motor cars, 5 jeeps, 328
Chapter 06 | Expenditure Review

Expenditure Double Cabs and 51 vans in 2016.

In 2016, four circulars have been issued in the Provision of motorcycles to Government field
areas of budget preparation, vehicle procurement officials was halted as per the Budget Proposal
and relief on disaster victims. 2016. Under this category, 359 motorcycles/
scooters were provided in 2016.
1. Circular No - NBD 01/2016 dated 17.03.2016
– Guidelines for procurement of vehicles for 6.11 Composition of Government
Government Agencies under the Operational Expenditure
Leasing Method.
The main emphasis of the Government Budget
Circular No - NBD 01/2016 (i) dated 19.09.2016 2016 was given to create regional development
– Guidelines for procurement of vehicles for corridors, enter the global value chain, provide
Government Agencies under the Operational facilities to set up businesses, strengthen human
Leasing Method (Amendment to NBD 01/2016 resources, upgrade agriculture and fisheries
dated 17.03.2016). sectors, facilitate the evolution of a strong digital
technology, set up new industrial zones and
2. Circular No - NBD 02/2016 dated 02.08.2016 develop the tourism sector.
– Budget Call 2017- Guidelines and Directions
for the Preparation of Annual Budget Estimates
Accordingly, priority has been given to
for 2017.
develop infrastructure facilities such as roads,
railways, expressways, irrigation, and physical
3. Circular No - NBD 03/2016 dated 30.12.2016
infrastructure in health and education in 2016.
– Guidelines to provide relief to the disaster
Recurrent expenditure was also assigned to
victims in a disaster emergency situations and
continue welfare programmes for children,
to the people evacuated from the residencies
elderly, pregnant mothers, differently-abled
due to disaster risk and restoration of damaged
persons and for subsidy programmes such as
areas.
fertilizer, Samurdhi and free medical supplies
etc. The composition of the expenditure is shown
4. Circular No - NBD 04/2016 dated 17.03.2016
in chart 6.1.
– Guidelines to grant compensation for the
fishermen who died while engaging in fisheries
Chart 6.1 | Composition of Public Expenditure
activities in a disaster emergency situation.
in 2016
6.10.4 Procurement of Vehicles to the 25%
26%

Public Sector
Procurement of vehicles to the Public sector was
changed from Finance Lease Method (FLM) to 6%
Operating Leasing Method (OLM) as proposed
18%
by the Budget 2016. The objective of changing the
system was to implement a more cost effective 25%

system to the Government than the previous Salaries and Wages Operations Cost
Interest Payment Social Transfer and Subsidiries
system. Accordingly, all Government agencies Public Investment

were advised to follow the guidelines of the

96

MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

6.11.1 Salaries and Wages services such as fuel, electricity, transport,
traveling, maintenance of vehicles, machinery,
The expenditure on salaries and allowances for building rent and other contractual services
Government sector employees including those declined by 30 percent to Rs. 148.9 billion in
who are in Provincial Councils (PCs), Security 2016 from 193.3 billion in 2015. The operational

Chapter 06 | Expenditure Review
Forces and Police was Rs. 570.8 billion in 2016. cost accounted for 8.4 percent of the total
This was an increase of Rs. 9.0 billion (1.6 percent) expenditure.
when compared to Rs. 561.7 billion in 2015.
Expenditure on salaries and allowances was 32.4 6.11.3 Transfers and Subsidies
percent of the total recurrent expenditure for
2016. The Government spent Rs. 438.7 billion for
social transfers and subsidy programmes in
Table 6.6 | Salaries and allowances of the Government 2016 compared to Rs. 419 billion in 2015. This
Rs. Mn amounted to 24.8 percent of the total recurrent
Sector 2012 2013 2014 2015 2016
expenditure in 2016 covering subsidies and
Central 95,965 113,223 133,584 172,491 184,856
Government welfare payments provided by the Government.
Provincial 88,217 105,034 121,789 150,796 143,740 These subsidy and welfare schemes were targeted
Councils
to the most vulnerable groups and selected
Defence 126,950 134,295 141,138 176,810 180,829
Police and 36,615 40,677 44,471 61,633 61,336
categories of individuals in the society, such as
Public infants, lactating mothers, elders, the differently-
Security
abled, kidney patients, farmers and members of
Total 347,747 393,229 440,982 561,730 570,761
Source: Department of National Budget
low-income households in the society.

The Government incurred Rs. 40,740 million
Salaries and allowances allocated for 2016 as for Samurdhi cash grant in 2016 targeting the
opposed to the actual cadre of several major poorest segment in the society. In addition, Rs.
sectors in the public domain are shown in Table 27,771 million was spent for the fertilizer subsidy
6.7 as follows. in 2016. A total amount of Rs. 38,028 million was
spent in 2016 to continue free medical supplies
Table 6.7 | Personal Emoluments and Actual Cadre number
for several major sectors of Government for Government hospital, a 20 percent increase
Amount of compared to Rs. 31,703 million in 2015.
Salaries and
Actual
Sectors allowances
Cadre No.
for 2016
With the aim of increasing the nutrition level
(Rs. Mn)
Education Sector 307,089 166,808 of lactating mothers, infants, school children,
Health Sector 136,476 106,889 the Poshana Malla, Triposha Programme,
Defence 411,598 242,164 Kiriweeduruwa and school nutrition
Other 498,113 54,900
programmes continued with a spending of Rs.
Total 1,353,276 570,761
7,415 million in 2016.

The total pension payments was Rs. 173.1 billion 6.11.4 Social Security
in 2016 from Rs. 156.6 billion in 2015. This was
due to the increase of basic salary stemmed
The expenditure on the pension increased by
from the salary conversation as per the Public
10.6 percent in 2016, amounting to Rs. 173
Administration Circular No. 03/2016 dated
billion compared to Rs. 157 billion in 2015. The
25.02.2016.
cost of social security assistance for injured and
differently-abled soldiers was Rs. 26,679 million
6.11.2 Operational Cost
in 2016 from Rs. 23,433 million in 2015. The
expenditure on “Ranaviru Mapiya Rakawarana
The Operational Cost of the Government allowance”, which is the social security scheme
covering all costs associated with utilities and

97

MINISTRY OF FINANCE, SRI LANKA | ANNUAL REPORT 2016

for parents of deceased soldiers, amounted to increase of interest payments on foreign debt was
Rs. 2,442 million. A totoal amount of Rs. 678 due to the depreciation of rupee against foreign
million was also spent on payments of monthly currencies.
allowances for victims of the strike in July 1980.
Table 6.9 | Domestic & Foreign Debt Servicing
Chapter 06 | Expenditure Review

Rs.Bn
6.11.5 Devolved Administration Details Domestic Foreign Total
Interest Payment 509.82 101.07 610.89
Provincial Councils (PCs) were established by Debt Repayment 596.43 145.12 741.55
Total 1,106.25 246.19 1,352.44
the thirteenth amendment to the Constitution
Source : Department of State Accounts
with an objective of devolving political power to
the Provincial level. Chart 6.2 | Interest Payments

Interest Payments 2012 - 2016
Rs. 169,038 million was transferred to the PCs in 700
2016 to cover the recurrent expenditure. These 600

expenses mainly cover the personal emoluments 500

Rs. Bn
of employees of PCs. Rs. 26,071 million was 400
509.8
transferred to PCs as capital expenditure. These 300 354.7
366.5
450.1
317.7
transfers were allocated from the national budget 200

100
on the recommendation of and in consultation 90.8
108.2 77.1 77.2 101.1
0
with the Finance Commission. Such funds were 2012 2013 2014 2015 2016

recommended by the Finance Commission after Foreign Domestic

considering the requirements of the Provinces. Source: Department of Treasury Operations

The above transfers were distributed among
Provinces as follows. 6.12 Public Investment
Table 6.8 | Transfers to Provincial Councils
Rs .Mn In 2016, public investment as a percentage of
Provincial Council
Transfers GDP amounted to 5 percent.
Recurrent Capital
Western 21,744 2,194 Chart 6. 3 | Public Investment as a Percentage of GDP
Central 23,375 2,485
Southern 20,508 2,200
Northern 16,757 6,038
7
North Western 20,823 2,831
North Central 14.174 2,950 6.5
Uva 16,422 2,166
6
Sabaragamuwa 18.219 2,343
Eastern 17.016 2,864 5.5

Total 169,038 26,071
5
Source: – Ministry of Provincial Councils & Local Government
and National Budget Department 4.5

4

6.11.6 Debt Servicing 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Annual Report, Central Bank of Sri Lanka
The Government expenditure on interest
payments in domestic and foreign debt was
Rs. 610.9 billion in 2016, which is a 15.9 percent Even though the public investment moderately
increase when compared with the previous year. declined as a share of GDP, major projects are
However, domestic interest payments increased being continued in economic sectors as follows.
by 13.3 percent to Rs. 509.8 billion and foreign
interest payments increased by 31.0 percent to Rs.
101.1 billion compared to 2015. This significant

98

including central Government transfers to PCs for healthcare services was Rs. 136. cardiovascular disease. and wages of healthcare staff and 33. laundry. 23.1 Investment in Healthcare delays. The expenditure on essential requirements such as diets. The total recurrent medicines and biomedical equipments were expenditure was Rs.MINISTRY OF FINANCE. the healthcare indicators related to developed countries. This Lanka is the second country to eliminate Malaria was around 89.2 billion and Rs. As a result. Rs. to an increase of Priority areas such as the supply of essential 4. of the art cancer treatment building complex a low level of maternal and child mortality with 700 beds was handed over to the Apeksha while achieving the desired levels in most of Hospital.4 billion. Moreover. Overcrowding in main Rs. 12.793 million in 2016. These initiatives will Source: Department of State Accounts. 113. Maharagama. in 58 order to reduce overcrowding in secondary and 150 46 tertiary care institutions. Sri Lanka has been overcrowding of hospitals. Accordingly.9 ensured through budgetary support in 2016 percent was assigned for the payment of salaries by allocating Rs. Bn 24 22 100 25 19 hospitals occurred due to the non – adherence 25 132 137 50 64 72 94 114 to a referral system and the lack of facilities in 53 0 primary health care hospitals. electricity and water was Rs. the World Health Curative Healthcare Organization (WHO) certified that Sri Lanka has eliminated Malaria. Therefore.034. With the rapid increase of Non-Communicable Diseases (NCDs) such Investing in health is an important determinant as cancer. providing uninterrupted supplies of medicine.4 | Expenditure by the Central Government The Government took several steps to improve 250 infrastructure of teaching hospitals and district 200 general hospitals with necessary facilities. of economic growth and competitiveness. 4. a state able to maintain a high level of life expectancy. strokes. This was mainly due to the procurement 6. a decline of 18. Lymphatic Filariasis The largest part of the capital investment has and Maternal and Neonatal Tetanus by 2016. Sri been allocated for curative health care. Therefore. The total Government expenditure.1. Chart: 6. The diabetes. Finance Commission reduce the unnecessary burden on investment to provide high level facilities in secondary and tertiary healthcare institutions. SRI LANKA | ANNUAL REPORT 2016 2015.7 percent for respectively. 3. Hospital infrastructure development projects were continued in 2016 with the aim Free universal healthcare coverage is ensured of increasing healthcare facilities at District with a higher investment in health sector by the and Provincial level hospitals while reducing Chapter 06 | Expenditure Review Government.690 million.12.4 percent compared to 2015.6 percent from 99 .647 million. new issues and challenges have taken Government is mindful of the need to make place causing losses in productivity.3 million in 2016. The total capital expenditure in 2016 was Rs. expenditure in 2016. the 2010 2011 2012 2013 2014 2015 2016 Government’s focus turned to improve primary National Provincial healthcare institutions. timely investments in health to create healthier public investments for the curative of NCDs was and more productive lives.042 million of which 54.5 percent of the total capital in the region after Maldives.

of Education and the Provincial Councils were the Government investment for strengthening Rs. respectively.7 percent. Accordingly. 15. SRI LANKA | ANNUAL REPORT 2016 Table 6.158 million. of which.373 Projects General Education Chapter 06 | Expenditure Review Hospital Rehabilitation 1633 2.306 1. the allocation Preventive Healthcare for general education activities increased significantly in 2016.242 24.10 | Investment in Health Sector compared to 2015. 123.12. 208. 260. Service delivery expenditure by the Ministry cardiovascular disease and stroke etc.630 million Investment Area 2010 2011 2012 2013 2014 2015 2016 and Rs.526 with the view of uplifting the education both Source: Department of National Budget and Department of State Accounts Note: Includes only the Central Government Expenditure quantitatively and qualitatively by eliminating inequalities in the school system.83 million in 2016. 60 Several steps were taken to promote Indigenous 40 Medicine through the conservation of medical 20 plants and research programmes. 49. these activities was Rs.360. The capital investment was Rs. The National Programme for Nutrition (Thriposha) conducted successfully throughout Chart 6.828 2. an increase of 11 percent the school were requested to prepare master 100 . Hospital Development 3920 3.5|Expenditure on General Education by the Central the country covering the 1.093 of developing all schools as a priority need for Machinery providing equal educational opportunities Beds & 88 119 114 127 200 224 324.94 Furniture to all children in the country.2 Education Source: Department of State Accounts.775 8. MINISTRY OF FINANCE.606 million was spent by the Ministry of Education.735 & Construction The Government has focused on the importance Medical Equipment & 1338 2.6 million in 2016. minimizing regional investment for General Education.197. It is expected to develop Education. The total recurrent expentiture Rs.686 14.068 4.208 5. 51. 2.429 10.051 1. University and gender disparities. beneficiaries at a cost of Rs.528 million.Mn 100 Provincial and healing systems. Rs. the “Nearest School is the Best School” increased access to education at all levels. All the provinces and Rs.878 18. respectively.880 3.051 million.403 4. 200 180 160 Promotion of Indigenous Medicine 140 120 In order to uplift the traditional medical practices Rs. the program was introduced to ensure equitable Government took many initiatives with higher access to quality education. Total 6979 7. non-communicable diseases including cancer. 2010 2011 2012 2013 2014 2015 6.117 11.251 million.754 3.670 11. Technical and Vocational Education 600 schools with two schools selected to represent and Seience and Technology Development.Mn and capital expenditure were Rs. Rabies.969 3. Investment in disease prevention in 2016 mainly targeted the control of wide spreading The total expenditure of Central Government on communicable diseases such as Dengue.350.194 7.431 15. The each Divisional Secretariat Division and develop total expenditure of the Education Sector was them as “smart school”. the Government increased 80 National the investment in this area in 2016 by 21.1 million registered Government. 1.324 million and Rs. Finance Commission Considering the importance of providing In 2016.927 18. general education in 2016 was Rs. Tuberculosis and the prevention of an increase of 11 percent in comparison to 2015.206 3. 24. Therefore.889 million in 2016.

076 3.Year 5 184 225 283 240 268 300 365 324 Season Tickets (a) 1.6.MINISTRY OF FINANCE.700 3. contour lines 1. This change of text book printing papers.916 Programme Text Books 2. In addition. In addition.369 1. library and the areas of construction and repairs.364 1. 1 Schools the Department of Educational Publication was Facilitate Dental Health Facilities in Schools 51 requested to make the school children aware of Providing Sanitary and Water Facilities for all Schools 1.800 1.850 3. The program is being implemented With the aim of providing the equitable and a Chapter 06 | Expenditure Review under 3 main projects and 6 secondary projects. to e-learning activities in selected schools by improve essential infrastructure in schools under introducing computer based office.251 2. a reduction. Further.503 million in 2016 a 15 percent Table 6. of Rs.11| Projects under Nearest School is the best School increase compared to 2015.998 (a) Provided to the Ministry of Transport Source: Ministry of Education and Ministry of Transport 101 . the identified works were Rs. This saving was mainly due Providing Electricity Facilities through 560 to the rectification of issues arisen in 2015. based on the priorities. 25 plantation schools to develop basic facilities student welfare programs were continued by and upgrade them into secondary level. 76 million has been allocated for In order to reduce the regional disparities. A total of Rs. As the National Grid or Solar Improving Facilities to Educate Science in expenditure on school text books are on the rise. Budget however. the Ministry of Education has taken steps to promote Table 6.360 Schools which were students to clearly identify maps.600 1. Rest 27 the text books of “Geography” subject of Grade Room etc.896 5. of good and equipment.261 2.725 3. Department of National books. Providing a voucher Program to purchase school uniforms was implemented Actual successfully for the 2nd consecutive year with a Project Expenditure (Rs Mn) cost of Rs. incurred an additional expenditure of Rs. 104 Facilitate Teacher Training Programmes 184 million from 2015.631 2. and human resource development. The expenditure incurred for existing system. Rs.294 2.12.415 Uniforms 1.157 Scholarships .260 949 1.384 1.400 2. the government started Since the Ministry of Education had to finalize restructuring the education system to introduce the implementation mechanism with provinces 13 years of compulsory education.329 2. quality education for all.12 | Expenditure on Welfare Programmes Rs.for Rural & Regional Schools 7 in high quality synthetic papers for enabling Upgrading facilities of 1000 Secondary Schools 710 Improve facilities of 1.5 million was spent for providing foreign training to school principals and teachers to improve the teaching quality.233 1.717 the use of school text books properly. 155 million.207 not included in recent projects etc and also to increase the durability of the Source: Department of State Accounts. Mn Programme 2009 2010 2011 2012 2013 2014 2015 2016 School Nutrition food 2. spending Rs.157 million. Sound as well as identify the required tasks.359 1.474 2. 2.938 3. provision evaluation systems.430 1.739 3. Upgrading Facilities of 3.577 Primary Schools 1.695 1.196 1. 51. the educational policies are being discussed and implementation stage started in the latter will be implemented to address the issues of the part of 2016.574 2.611 the Ministry of Education took measures to print Providing Facilities of Teacher Quarters. SRI LANKA | ANNUAL REPORT 2016 plans at school level.941 2.068 million.

of Students improved facilities for University students.363 4.309 122.377 38.C.886 26. Arts. be considered as the pinnacle achievement in the 1.221 Source: Ministry of Education.206 778. Following Stream.000 4.746 44.082 49.435 834.000 85. 01.176 5.643 1. This university education was an increase of 11 percent in comparison to Financial Assistance to University Students (Rs.000 327.762. the Admitted on 22. MINISTRY OF FINANCE.048. A total of 27.071 million.Finance Commission and Ministry of Transport University Education Table 6. who sat The Green University (NSBM) in Homagama for the G.480 Season Tickets 300. University of Jaffna have Development and Vocational Training. are highlighted as the major achievements in Technical and Vocational Training sector in 2016 along with the above. Business Studies training institutes under the Ministry of Skills in Vavuniya Campus.676 students in the 2014/2015 academic year.099 329.E (A/L) examination in 2015.676 27.000 4.890 4.309 129. government investment in such infrastructure development in this sector in 2016 was Action was taken by the University Grant approximately Rs.576 infrastructure development in Universities such Source: University Grants Commission and Department of National as lecture rooms.016 28.581 Scholarships .153.897 5.000 300. a three-fold Commission to accommodate admissions for increase from 2015.000 4.603 students were qualified to enter Technical and Vocational Education 15 Universities for the academic year 2015/2016. and Vocational education in 2016 was Rs.064 5.178 973.277. The capital Academs staff 5. 60 hostels were established up to 2015.998.423.491 Chapter 06 | Expenditure Review Uniforms 4.345.008 3.695.750.432 3.000 3.198 25.119.000 4. 2.099 4. The new building complexes and new construction works in vocational of Faculties of Engineering.000 85. Rs.614 72. Establishment of a Centre under the Sri Lanka German Technical Institute (SLGTI) in Killinochchi 102 . Additional 24 hostel complexes are to be expenditure was on infrastructure development completed in 2017.000 300.415.892 890. In order to accommodate the additional number 10.14 | Details on University Education 2011 2012 2013 2014 2015 2016 Creating a better learning environment with No.000 300. Budget toilets.194.245 Programme Text Books 3. 28 billion was provided Mahapola 127 101 94 109 827 912 to 15 universities and 19 higher educational Bursary 357 283 386 414 937 832 institutes to cover salaries and wages.000 97. laboratories. Out of which was declared open in Homagama could the total student intake for the year 2015/2016.303 3.000 310. A substantial portion of this increased 2015.724.Mn) Rs.000 338.813 4.908 24. 49 billion in 2016.13 | Students Benefited by Welfare Programmes No. of Beneficiaries Programme 2009 2010 2011 2012 2013 2014 2015 2016 School Nutrition food 654. 15 billion was mainly used for Investment 18.038.200 25. This was an increase of 8 percent compared to The Government expenditure on Technical 25. play grounds and library etc. a 20 percent increase from of students.306 839. 44 billion in 2015.603 Government invested Rs.341.423 Total allocation of Rs.404 937.186.076.610 5.Year 5 85. the first intake of technology stream. hostel buildings.668 4.000 million.202 4.950 20.000 85.825 students were selected for the Technology Skills Development Sector in 2016. SRI LANKA | ANNUAL REPORT 2016 Table 6. The total been completed.439 5.

70. 7.423 and other popularization programs was Rs. 3. The following table shows the breakup of Crop Agriculture expenditure of this programme. laboratory accreditation and technology commercialization.726 237. The total investment in this sector continued to be funded by the annual budget amounted to Rs.Central Bank of Sri Lanka Some noticeable achievements being recorded (a)Provisional in 2016 include scientific publications. social and environmental 6. obtaining patents.7 Development Programme of the Ministry of billion including the investment on the fertilizer Science.15 | Skills Sector Development Programme The crop agriculture sector consists of paddy. fruits. Tourism and light gradually decreased due to the structural changes. Technology and Research increased by subsidy. 3. Table 6. other field crops. and ornamental flowers Science.45 billion. The Government Expenditure on Science. Several investment programs are being Other 140 implemented in the cultivation of other field Total 1. Establishment of three Industrial Sector formulation of Gross Domestic Product has Councils for ICT. 55 million.828 2016 (a) 338. 1. The Provision for capital expenditure to the plantation industry Agriculture sector plays a vital role as the increased from Rs.16 | Value of Agriculture related Export and Import Rs. The total expenditure on Scientific investment for this in 2016 amounted to Rs. Technology and Research will boost the potential of earning a higher amount of foreign exchange. 4.715 166. 47.763 213. Plantation industry plays a significant role to achieve economic.308 million.450 crops in order to reduce imports.225 million to Rs. SRI LANKA | ANNUAL REPORT 2016 the contribution of agriculture sector in the 02. 60 2014 364. Paddy cultivation is the Improvement of Training Centers 824 Capacity Building 74 main economic activity in the crop agriculture Incentives for Lectures 140 sector. 28 a subsidy for the farmers to an end.12.458 220.148 million in 2015 the prevailing system of providing fertilizer as while capital expenditure decline by Rs. Engineering sectors in 2016 more than 70 percent of the rural population is engaged in agriculture related activities for their Chapter 06 | Expenditure Review The Skills Sector Development Programme was livelihood.294 subsidy for the fertilizer in 2016 in order to bring million in 2016 from Rs. in the country for meeting the demand of local fisheries. standard Plantation Industry development. The expenditure resources management.3 billion in 2016 including its with the aim of developing the skills education subsectors such as crop agriculture.807 backbone of the Sri Lankan economy. Export Food and Beverages The total spending on this international forum 2012 297. technology transfer.MINISTRY OF FINANCE. spices Rs. Although 103 . plantation. The total million. livestock and irrigation and water and foreign labor markets.038 Source: . Activity Expenditure vegetables. Mn and other export oriented crops. medicinal plants.003 2013 333.942 176.Ministry of Skills Development and Vocational Training & Department of State Accounts in the promotion of industries such as tropical fruits. Technology and has introduced a scheme of providing a cash Research increased by 4 percent to Rs. 81 percent to Rs. Mn was held in Colombo with the participation of Value of Agriculture Values of Imports of Year distinguished Sri Lankan and foreign Scientists. flowers and New Construction 272 ornamental plants. of this special programme in 2016 was Rs.3 Agriculture development targets of the country. 2015 337. The highly Successful Science and Technology for Society (STS) Forum Table 6. Investments Source: .

15 billion in 2016. ports. Thrust Area Development Program and Upgrading 104 . 6. Tea and Rubber revitalization Nagar and Puranawella project started in 2016 with the financial assistance For the program of empowering fisheries 130 community of Rs. rubber. demand and to provide opportunities through enhancement of the water capacity of existing enhancing the quantity and quality of livestock reservoirs and productivity and efficiency production. employment and revenue through investments and exports. contributed to the development of livelihood of the Rs. The following relevant line Ministries.Ministry of Fisheries and Aquatic Resources nontraditional areas such as Ampara and Polonnaruwa in order to increase the production Irrigation and Water Resources of rubber.035 million had Management been provided for the plantation industry through the annual budget. 7. Rs. has taken several measures to fulfill the domestic development and construction of new reservoirs. During the year. The government sector including Mahaweli development. 0.194 scale fishery industry Chapter 06 | Expenditure Review million was provided for fertilizer subsides to For the development of fisheries harbours in Chilaw. The irrigation sector has provided a substantial contribution to the national economy. creating employment While investing a large sum on infrastructure opportunities. 112 the National Food Production programe Enhance fish breeding capacity 94 Cultivations have been expanded to the Source: .34 billion had been spent for various industrial development programs including the Industrial Estate Development Program. 2. A investment and public sector interventions by major portion of investment has been allocated way of consultation. development. supplying Livestock sector consisting of dairy cows. of Rs. MINISTRY OF FINANCE. water and electricity through the status of the fisheries communities. 9. water for domestic and industrial sectors and poultry and swine subsectors has considerably maintaining ground water stock. SRI LANKA | ANNUAL REPORT 2016 million with the aim of developing tea. Key Projects Rs. Table 6. Moragahakanda Kalu Ganga management programmes and research and Development Project. landing sites and fisheries harbours Special attention was drawn to smallholders of Introduce new technology for small and medium 878 Tea. contributing towards earning facilities such as roads. and upgrading socioeconomic airports. Mn For the development and reconstruction of 997 anchorages.17 | Major Projects implemented during 2016 coconut and sugarcane industries.12. Mirissa. 25. Fisheries sector aims at upgrading the nutrition level of people. Kalmunai. 11. an additional sum projects were implemented to boost the sector. Out of this Rs.6 billion has been invested in irrigation people over the last few decades.4 Industrial Development The total investment of the sector amounted to Rs. foreign exchange. 6.98 Industrial development is a prime focus of the billion invested for the livestock development Government as it plays a critical role in the and training.080 million funded by the International For the contributory program of fisheries sector to Fund for Agricultural Development (IFAD). Rubber and Coconut in 2016 and Rs. Its Livestock involvement can be seen mainly in providing irrigating water for agriculture. Investment for Animal Health and country’s longterm prosperity by generating Research was Rs. chicken. These measures include the direct improvement in consumption of water.18 billion. Valvettithurai. highways. Karai 192 smallholders. For this purpose. implementation of hygiene for the Yan Oya. and the Uma Oya Project. 1. Providing prerequisites such as Fisheries infrastructure to spur the industrial development was key priority of the Government in 2016.

782 5. 2% generation.18 | Expenditure on Power and Energy Rs.156 31. several measures were development is to provide a high quality and implemented in 2016. 13.MINISTRY OF FINANCE.966 1.324 5.307 acting as project management units.25. The number of households (SMEs) financially to commence or expand benefitted by this scheme was 234.420 referred to as Participating Credit Institutions Total 23. focusing on requirements in the energy Development sector and to fill the gaps in areas such as power Development of Thrust Area programmes. 111. Thrust Area Development Programme Handloom and Textile Industries Upgrading and Modernization of Mini Industrial Estates Others ‘The Ratama Eliya Andura Duralai Jathika Viduli Sathkaraya’ programme was launched island Source : Department of National Budget wide to provide service connections to people in order to achieve the target of 100 percent access Small and Micro Industries Leader and to electricity. Rs.447 8. the extent of Small and Micro Industries Leader and Enterpreneur gross electricity generation increased from 13.37.79.639 4. transmission and distribution.195 15.250 GWh in 2016. These banks were Distribution 8.(mn) Sector by enhancing productivity and capacities. 4% Industrial Zones. In 2016.76. 269. 3992. The loan Source: Ministry of Power & Renewable Energy disbursement commenced in 2013. 147. Ministry of Industry and Commerce in 2016 (Rs.281 2.3 percent at the end of 2016.690 public and private sectors. the 286. such investments made by the CEB for energy sector Chapter 06 | Expenditure Review Chart 6.684 5. government invested Rs.174 11.230 5. Industry and Commerce in 2016.5 percent in Development of Industrial Zones Industrial Estates Development programmes 2015 increased to 99.655 by the end projects via a revolving fund. The Category 2010 2011 2012 2013 2014 2015 2016 interest rate would be around 8 percent. In Government took measures to strengthen the 105 . In order to support this policy decision.44.114 5.963 5. Development Programme. 2% A total installed capacity was 4.19). 1253.197 loan is channeled through 10 Banks from both Transmission 4.8 billion. transmission and distribution.172 Promotion Project - SMILE III .12.2 billion.277 8.93.580 18. 40.752 12.Mn) Industrial Estates However. The Government aims uninterrupted supply of electricity island to focus more on non-conventional renewable wide with sustainable and cost effective power energy sources such as wind.000 Fund project was launched in 2012 with a view was provided to identified-families to obtain to assist Small and Micro scale Enterprises electricity connection.985 million was disbursed for 903 projects.5 Infrastructure Development In order to meet the growing electricity demand Power and Energy of the country through increasing generation capacity and using appropriate technologies in The ultimate target of the Power sector an economical manner.052 MW in 2015.373 32.408 10.842 22. 63% GWh in 2015 to 14. which was 98. 5% Handloom and Textile Industries.520 13. (NCRE) 6. 2% Institutional Development.004 20. The Generation 11.6 | Capital Expenditure on Industrial Development by was Rs. The project would of 2016. SRI LANKA | ANNUAL REPORT 2016 and Modernization of Mini Industrial Zones financial position of the Ceylon Electricity Board to support industries through the Ministry of in 2014. In contrast.284 11. 35.02. 2% from 4.81. 20% Upgrading and Modernization of Mini Industrial Estates. Non-Conventional Renewable Energy 3.038 MW in 2016 Others. A concessionary loan scheme was Entrepreneur Promotion Project III – Revolving introduced and a maximum limit of Rs.482 3. In 2016. The average Small and Micro Industries Leader and Enterpreneur Promotion Project SMILE III Institutional Development electricity coverage.613   7. provide low interest loans to establish a new business or to strengthen the existing business Table 6. dendro and solar generation. The project it was expected to enhance the investments made wise breakdown of the expenditure is as follows: by the CEB on the power sector. 122. The power over the medium-term (Table 6. 153.

tickets for students of schools and Chunnakum area. MINISTRY OF FINANCE. 2. Department of Sri Lanka Railways. Replacing the Northern Railway Lines. 4. Polonnaruwa and Wind Park in as season. movement. At the end of the year 2016.9 15 123. 8. the contribution of these sources to the and the agencies coming under the Ministry to national grid was 11 percent. Grid Connected 2015 Grid Connected 2016 Non.3 179 497. Rs. Rs. Sri the Domestic Airport at Batticaloa in 2016. Omanthai – Pallai. Wind 15 123.292 KW of capacity was added to the national grid by 644 number of systems.391 million incurred by the Ministry 106 . 49 million was spent community based solar electricity generation for construction of bus stands. 3. achieve the target.19 | Contribution of Non-Conventional Renewable addition. During the year 2016. Several programmes were initiated and During the year. incurring Rs. Matara – Beliatta and Kurunegala Source installations capacity installations capacity – Habarana via Dambulla which are extending (MW) (MW) the existing rail line by 107 km. Rs. 6.77 Medawachchiya – Madu. 67. A loan scheme uneconomical cost of the SLTB. a spare parts. 15 per unit.6 9 24. 203 million was spent for the development of Aviation.825 million for new public transport is a comfortable. The Ministry of Transport and Civil Rs. Small Hydro 154 306. as a result. a Volunteer of electricity customers through rooftop solar Retirement Scheme was introduced to curtail the panels to the national grid.conventional renewable to settle the liabilities of purchasing of buses and Chapter 06 | Expenditure Review energy sources. higher education.126 million to settle liabilities. Madu – Thalaimannar . Total 179 455. In Table 6.13 Source: Ministry of Power & Renewable Energy An investment of Rs. the Within the total recurrent expenditure of the Ceylon Electricity Board and private parties transport sector. SRI LANKA | ANNUAL REPORT 2016 2016. bus passes for Armed Forces and for the expenses of unremunerated routes. of Peak railway projects.530 million has been made implemented to use non. Another Rs. 6.505 million was allocated and consumers who produce electricity can earn Rs. 4. Lanka Transport Board and other institutions coming under the Ministry are responsible to fulfill needs of the public.253 million has been provided to Energy Sources SLTB as financial assistance to pay salaries and settle the liabilities of EPF/ETF. of Peak No. Rs.470 million was contributed in 2016 for Conventional Average Average Primary No.10 payment of Rs.9.287 million was spent on have facilitated to implement Solar Parks in financing the transport related subsidies such Valachchenai. 97 million was made for land and land improvement of the Kelani Velley Public Passenger Transport Line under the rehabilitation of the existing capital stock of the Department of Sri Lanka The general public expectation through the Railways. In addition. As a solution program was initiated to integrate the solar to the current financial crisis faced by the Sri electricity generated in houses and premises Lanka Transport Board (SLTB).228 excess employees were made to 22 per unit during the first 7 years and thereafter retire which proved to be an advantage for the Rs. To implement was introduced under this program where the this scheme.90 Pallai – Kankesanthurai (KKS) and a new railway Solar PV 2 1. Rs 7.36 signaling system from Anuradhapura to KKS were completed during the year 2015 with the Biomass 8 23.4 169 337. Rs.38 4 11. SLTB to minimize the operational cost. safe and speed rails and sleepers for replacement of the existing. The ‘Battle of solar energy’.

782 67.836 12.042 3.155 45.329 77. SRI LANKA | ANNUAL REPORT 2016 Table 6.586 32.210 1.089 million was spent on road and bridges development.13. .222 14.228 4.016 8.21 | Investment in Drinking Water and Sanitation Sector financing mechanism of the water supply and (Rs. 26 billion have been utilized to the water In 2015.530 Chapter 06 | Expenditure Review Reconstruction of Rail Tracks 3. Badulla Chenkaladi road. all borrowings Project Total Expenditure to water supply and sanitation projects are done Water Sector Community Facilitation 907 by the NWS&DB with the subsidized debt service Small & Medium WSP 1. Mn) Major Thrust Areas 2010 2011 2012 2013 2014 2015 2016 Service Delivery 12.8 billion was utilized as domestic counterpart (NWS&DB) in order to strengthen their balance funds of foreign funded water supply and sheet and ensure the smooth functioning of sewerage projects. 3 Flyovers.708 44. including loans obtained from local banks in the total investment in water supply and sanitation water supply and sanitation sector was Rs. Mn) sanitation projects. Accordingly. Southern Extension during 2016 to 2020 expressway. the National Water Supply and Drainage Board 4.600 13. Road Development • Urban Water Supply Projects – 50% • Rural Water Supply Projects – 75% The Government has spent a considerable amount on road development in 2016. Outer Circular III.405 419 - Installation of Signaling & 115 206 3.662 3. a sum of Rs. worth of Treasury Bonds converting the debt of out of the Treasury Bonds proceeds.478 4.884 48. budgetary provisions amounting to Rs. the Government issued Rs. NWS&DB directly.838 954 1. 38.599 18. provisions in the future.203 1. However. Rs.606 3.20 | Investment in Passenger Transport (Rs.676 Construction of Rail Lines 2. This is an extra burden to the National and remaining funds of Treasury Bonds are used Budget. By the • Sewerage and Waste Water Projects – 100% end of 2016. The construction • Chronic Kidney Disease (CKD) Projects – 100% of the Central Expressway.772 percentages of debt service (Capital & Interest) Total 38. following the Large Scale Foreign Funded WSP 28. Thus.147 million was paid as capital foreign loans of all water supply and sewerage re-payment of the local bank funded projects projects are provided by the General Treasury in 2016. domestic counterpart funds of A sum of Rs 18. .974 Local Bank Funded WSP 7.MINISTRY OF FINANCE.673 of all foreign and local bank funded projects are Source : National Water Supply & Drainage Board borne by the General Treasury.451 Rail Fleet Improvement 5.045 14.828 4.588 1. will consider such borrowings on a case by case basis.498 16. for this purpose.877 2. Further.9 billion supply and sanitation sector in 2016. In addition. 107 . The total annual investment NWS&DB through its own funds.381 15.815 Improvement of Bus Services 79 175 227 412 150 161 49 Bus Fleet Augmentation 849 1.158 4. 146.411 68. the Government of Sri Lanka Kochchikade bridge commenced in 2016.117 2.506 28.944 5. if the lender is not willing to lend to New Kelani bridge.686 2. 82 333 279 203 Other capital expenditure 1.020 system by the Government.181 Telecommunication Systems Domestic Airport Development Project . However a cabinet decision has been taken in 2016 on the future Table 6.758 3.144 24. In this context.392 Source : Department of National Budget Drinking Water and Sanitation Accordingly.737 32.633 4.177 26.528 2.900 579 898 1.7 will not be mainly through the annual budgetary billion in 2016.767 3.079 19.488 Total 26.

6 Urban Development the benefits of urbanization that will be evenly The prime objective of the Government through distributed across the country.744 2.425 57. 581 - 7 Institutional Support 6.388 30.931 Integrated Roads Investment(i-roads) 83 6.073 59 6. Mn) Expenditure S/N Project / Programme 2015 2016 Domestic Foreign Domestic Foreign Expressways Development 11.062 Regional Bridge Project 497 1.778 924 8.803 4.283 Local Bank loans repayment 12.331 3.480 3.150 Second New Kelani Bridge Project 458 1.885 32.110 470 1.985 5.243 World Bank) way for making Sri Lanka a commercial.592 6.858 5.147 - Other 14. 146 billion.987 Other 755 12.040 1 Extension of Southern Expressway 6.031 . In addition billion was financed through foreign loans and to the Western Region Megapolis.034 350 728 Other(including construction of 3 flyovers) 1. naval Development of Strategic Cities- and aviation hub in Asia.279 63. while Rs.200 the entire Western Province into a Megapolis Redevelopment Project 108 .429 814 2.& Improve. Rs.23 | Expenditure on Major Development Projects in processes into the urban community in Sri 2016 (Rs Mn) Lanka which will ensure that the inhabitants of Total Expenditure in 2016 urban areas become part of the socio economic Project Foreign GOSL Total development of the country while maintaining Metro Colombo Urban high levels in quality of life.22 | Comparision of Major Investment Programmes Undertaken in 2015 & 2016 (Rs.833 Outer Circular Highway Project 4. the new concept of Megapolis Development is Table 6.331 Western Development envisages transforming Beira Lake Rehabilitation and 0 1.817 7. 1.333 1.935 36.342 103.848 821 1. 58 billion was spent through strategic cities such as Galle.12.308 110 2.815 3 Widening and Improvement of Roads 17.113 9.561 Reh. Kandy & Galle Project -(GOSL. This will pave the Development Project (GOSL. Kandy. Anuradhapura and Trincomalee have been Chapter 06 | Expenditure Review given priority during the medium term. 88 scheme within the next five years.171 5 Natural Disaster Affected Road Rehabilitation 48 350 46 86 6 Rural Roads Reawakening Programme 4.893 87.267 9.857 531 1.928 1.800 21.903 Source: Department of National Budget to bring systematic changes and development Table 6.270 . SRI LANKA | ANNUAL REPORT 2016 area to be part of a comprehensive development Out of the total investment Rs.161 42.013 4 Major Bridge Construction Project 55 2. domestic funds.395 . MINISTRY OF FINANCE.421 150 17.888 - Construction of Bridges and Flyovers 2. Jaffna.200 1. developing grants.419 33.099 120 2. Of Priority Roads 3. ensuring 6.183 11.535 24.098 447 1.266 5. 1.532 2 National Highways Sector Project 1.334 Highways Development 32.811 2.213 14. 18. 10.015 - TOTAL 74.194 Southern Transport Development Project 118 4.545 World Bank) Townships Development & In this context the Ministry of Megapolis and Urban Solid Waste Management 0 3.

215 partially damaged houses. In addition to these housing loan programmes. Mn. construction of Lunawa housing scheme was 109 . scattered housing programme and plastering programmes. 20.188 million has been spent for construction of 11. A sum of Rs 16. 9. 6. especially 6. assistance was given for 1. Under the Rehabilitation of Housing Transport Development Project phase 1. of 107 percent in comparing to 2015. water tower of Jalthara housing scheme Relocation of Manning Market at and 983 housing units were rehabilitated at a cost 0 303 303 Paliyagoda Chapter 06 | Expenditure Review Greater Colombo Flood of Rs.482 6. beneficiaries in the plantation sector.000 in cement was provided to 78. Rehabilitation.12. in 2016 (Rs. In these circumstances. housing development programmes were strengthened Further.7 Housing Development for internally displaced peoples. a grant of materials worth of Rs. This was a 163 percent increase investment.479 million was spent by the Ministry of Housing and Construction.101 houses With the aim of providing decent houses and and upgrading 2. Rs. Several modes of assistance such as. upgrading the existing houses for all. Out of the total beneficiaries. under the Theme of for the development of housing facilities in the “shelter for all”. 340 million was spent for this Greater Colombo Urban purpose.188 and Hindu Religious Affairs Ministry of Hill Country new 1. Protection and Environment 0 218 218 Development Project Source: Department of National Budget With the aim of providing housing facilities in the Eastern and Northern Provinces. 240 million during the same period.118 16. housing loans have been provided for 40.MINISTRY OF FINANCE.461 houses were completed while the rest are in progress. 10. SRI LANKA | ANNUAL REPORT 2016 Port City Development Project 0 656 656 continued and Rs. Out of the total houses which received housing loans. 727 million was utilized and expedited in 2016. construction of houses for Table 6.479 Construction Ministry of Prison Reform.394 The Ministry of Housing and Construction is responsible for providing assistance for housing development all over the country. With this as follows. These investments were utilized under different programmes such as model villages.200 727 Villages Total 17.315 beneficiaries for plastering their houses. a sum of Rs.24 | Housing Development Programmes 493 were completed and houses for 939 are in Allocation Expenditure progress.(GOSL Japan) scheme. In 2016. financial grants and material grants have been provided for beneficiaries based on their income and the requirement. a sum of Rs. access road to Soysapura housing Component .) Ministry of Housing and 6. which was an increase invested in 2016 through several line Ministries.Township Development 0 525 525 Schemes.436 9. Further. Ministry in 2016 (Rs.) Mn. concessionary loans. Resettlement 9.188 beneficiaries.394 million was estate sector in 2016.432 compared to the investment made in 2015.

SRI LANKA | ANNUAL REPORT 2016 Chapter 06 | Expenditure Review 110 . MINISTRY OF FINANCE.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 07 | Public Investment Programme 2017-2020 Public Investment Programme 2017-2020 07 111 .

In managing the nation’s contains the priority projects and programmes development activities. initiative with the objective of concentrating and the economic policy statements delivered by promoting economic activity and technology Hon. SRI LANKA | ANNUAL REPORT 2016 7.1 Overview 7. These five goals are aligned with the Sustainable • Minimize regional disparities Development Goals (SDGs) which focus on ending poverty and ensuring peace and • Protect environment and conserve the prosperity of all citizens. The PIP is sufficient space to invest in directly productive closely conncected to the national budget of and profit-oriented ventures while the the Government moving beyond the detailed Government will invest on projects focusing on estimation of the budget. • Promote equity in economic and social the middle class and Government employees spheres and creating a wide and a strong middle class. Thus. development of rural economies. Prime Minister on 5th Novermber 2015 development. MINISTRY OF FINANCE. the Government which carefully translates the present Government’s development priorities The Medium-Term Development Strategy of and policies into implementable projects and the Government contains a number of reforms programmes in the medium-term. both local and foreign. ensuring • Upgrade quality of human resources land ownership to rural and estate sectors.1. The GDP growth 112 . natural resources The macroeconomic targets for the four year period are shown in Table 7. A number of ‘Mega Zones’ Palanayak: A Compassionate Governance”. the private based on the macroeconomic fundamentals and investor. The PIP of economic growth. The five development goals of the Government are generating one million • Restructure Government debt employment opportunities. will be allowed ongoing and new project portfolio. and 26th October 2016 and “Powerful Sri Lanka” Document. The PIP is prepared following a The private sector is expected to make the major ‘rolling plan’ approach and updated annually contribution to economic growth and creation forecasting the future investment requirements of employment opportunities. the Government’s role to be implemented by the Government in the will be primarily supporting private investment. The PIP is and innovations in institutional arrangements prepared based on various policy communique in order to enhance economic performance and of the Government including the “Maithree promote equity. economic and social infrastructure development which are critically important to the overall development and generation of benefits to the The PIP is one of the main policy directives of society only in the long run. enhancing income levels. medium term. Main Components of the Economic Strategy Identified in the PIP The main focus of the PIP is to ensure the achievement of five main development goals • Improve export productivity and that reflects the broader objective of “Inclusive competitiveness of industries Development” which can be realized through • Increase Government revenue and much needed policy reforms and investment rationalize Government expenditure promotion.2 Medium-Term Macroeconomic Perspectives Chapter 07 | Public Investment Programme 2017-2020 The Public Investment Programme (PIP) is a four During the next four-year period. determined year programming document accompanying actions will be taken in achieving higher rates the Sri Lanka Development Plan. the are proposed to be established as one such key “Five Point Plan: A new Country in 60 months”.

5 41.8 814.9 percent Private Investment 16.8 0.0 98.0 Ports and Aviation 1.4 20.4 229.9 Plantation 8.5 77.2 8.0 6.8 479.3 7.4 9.3 31.5 4. Investment and Tourism 87.8 25.4 percent.6 -4.4 30.907 On-going Projects 1. Regional Development 68.5 173.1 25.4 89. This Total Expenditure 20.4 is followed by 21 percent investment in human Revenue and Grants 15.0 708.6 2.7 8.6 5.064. This indicates that Current Account Balance 0.4 152.2.8 Health 43.3 9.5 1.9 11.2 5.7 8. Public Investment 3. SRI LANKA | ANNUAL REPORT 2016 rate is expected to increase up to 7 percent in 2020 PIP 2017-2020 Highlights from the existing rate of 4.0 25.0 40. Department of through private financing.0 31. Department of National Planning 113 .5 10.3 5.2 180.6 50.6 32.6 6.7 6.1 756.1 12.3 54.6 45.0 7.0 Source: Public Investment Programme 2017-2020. Environmental Management 9.6 412.8 79. Accordingly.2 the Government has to continuously allocate Budget Deficit -4.006 New Projects 916 Middle Income economic status by Sri Lanka. Bn Chapter 07 | Public Investment Programme 2017-2020 expected to grow up to US$ 125 billion and GDP Investment Summary Project Portfolio Total Investment 19.7 41.2 3. the GDP Growth Rate 6.525 Investment of GDP is expected to reach a level of 16.0 201.9 resource development and 11 percent investment in industry and trade sectors.5 16.0 -3.9 9. Human Resource Development 153.7 95.7 94.1 Land Transport 35.7 46.5 percent of the GDP by 2020.4 o/w Education 99.1 144.3 1.8 amounting to 42 percent of the total investment Public Investment 5.5 percent of the GDP during the reference Investment 30.2 329.3 176.2 2. Social Protection 13. Infrastructure 268.8 Grand Total 708. Industry.3 2.4 327.9 5.4 5.5 6.4 either through increased public investment or Source: Public Investment Programme 2017-2020.3 21.3 Irrigation 67.3 20. Bn Projections Sector 2017 Budget 2017-2020 Cumulative As a % of Total 2018 2019 2020 1.488.5 more resources for human capital development Domestic Savings 23.7 10.0 7.3 58. Table 7.3 200. Good Governance 72.1 | Indicative Macroeconomic Targets 2020 % of GDP The annual breakdown of the public investment Projections during the 2017-2020 period is shown under Indicator 2017 2018 2019 2020 eight main sectors in Table 7.1 309.7 4.2 10.9 1.6 91.1 148. Department of National Planning to a level of 3.2 12.5 0.1 53. The GDP is Rs.MINISTRY OF FINANCE.1 20.0 16.7 38.0 247.0 94.797 by 2020.9 3.2 Fisheries 6.5 7.1 42.3 1.4 129.6 220.2 46.9 67.4 47. The highest investment of Rs.376 and the budget deficit will be gradually reduced Source: Public Investment Programme 2017-2020.6 369.0 943.3 338.6 12.0 3.9 26.6 25.531 Annual Programmes 842 This will earmark the achievement of Upper Foreign 1.8 25.1 111.7 will be made to the infrastructure sector.2 9.5 period.488 billion Private Investment 25.1 o/w Livestock 6.8 73.0 public investment is to be maintained at a level of 5.5 31.2 20. 1.0 88.8 13.3 7.9 100.1 81.0 45.1 o/w Roads 116.6 5.0 0.3 487.3 14.5 11. Trade.2 3.0 89.1 1.530. Agriculture 35. National Planning Table 7.7 42.2 | Sectoral Investment 2017-2020 Rs.3 7.3 Water Supply and Sewarage 26. Investment Domestic The Government revenue and grants as a share 2.5 1.773 per-capita will be raised up to US$ 5.3 -4.4 16.0 8.5 1.

7 46.8 66.8 133.2 339.4 25.8 814.9 1. whereas the allocation fiscal space to accommodate new priority projects for the annual programmes and new projects is during the planned period. Table 7.0 7.1 New 16. SRI LANKA | ANNUAL REPORT 2016 22 and 27 percent respectively.7 68.1 296.3 40.0 19.5 8.8 Ongoing 196.5 104.8 Infrastructure  Annual 55.4 11.7 2.8 38.5 4.6 Industry.5 Good Governance  New 24.0 23.2 19.6 2.9 Ongoing 10.7 12.1 66.2 | Infrastructure 50 300 45 40 250 35 200 30 Rs.1 Ongoing 39.8 27.0 Human Resource Development Annual 21.8 904.3 18.0 473.2 42.8 192.6 New 16.0 943. Billion 25 150 20 15 100 10 50 5 2017 2018 2019 2020 2017 2018 2019 2020 Ongoing Annual New Ongoing Annual New 114 .2 268.2 79.7 84.8 36.8 19.4 64.4 New 33.2 3.0 16.9 New 148.8 34.9 1.9 3.3 4.0 51.3 Agriculture Annual 15. Bn 2017 Projections 2017 .4 New 1.6 254.7 36.0 44.530.2 Ongoing 47.7 1.9 25.2020 Sector  Type Budget 2018 2019 2020 Cumulative Ongoing 89.9 3.7 7.5 16.3 17.1 56.5 4.5 Ongoing 3.9 487.2 258.7 1.7 10.6 15.8 54.4 5. Department of National Planning Comparison of Sectoral Investments 2017-2020 Chart 7.064.8 17.4 55.2 Ongoing 8.1 164. annual programmes and new projects.9 82.6 48.1 167.1 947.6 241.2 3.7 3.9 205.7 18.8 2.9 Environmental Management Annual 4. Table 7.2 195.9 90. Trade.1 2.4 68.3 Social Protection Annual 2.2 New 43.8 84. Trade. Investment & Tourism Annual 14.0 74.3 335.1 64.4 11.8 77.2 80.2 15.40 Allocation by Type of Project Annual 131.1 4.3 163.8 413.5 779. Billion Rs.4 21.5 Grand Total 708.1 | Industry.1 60.0 247.8 17. The investment identified for the annual The ongoing projects receive the highest programmes could be further reviewed to obtain allocation of 51 percent.9 16.e.3 | Sectoral Investment by Type of Project 2017-2020 Rs.3 39.0 2.8 90.0 Regional Development Annual 18. ongoing projects.7 5.2 New 11.9 234. MINISTRY OF FINANCE. Investment & Tourism Chart 7.9 4.9 Source: Public Investment Programme 2017-2020.3 shows the allocation of total investment Chapter 07 | Public Investment Programme 2017-2020 according to the type of project i.1 Ongoing 428.4 8.6 211.7 74.3 New 1.6 33.803.7 138.4 287.3 26.9 Ongoing 33.

000 129.776 243.212 *Project costs and repayment commitments are with the relevant SOEs ** Projects costs are partly born by the SOEs.4 Human Resource Development and disciplined generation equipped with basic skills and competencies in order to achieve a sustainable economic development based on a The education policy is geared towards ensuring knowledge driven economy.MINISTRY OF FINANCE.289 80. This shows the Government’s commitment public investment requirement for the period to promoting balanced growth in the country by 2017-2020 will be Rs. Also.4 | Agriculture Chapter 07 | Public Investment Programme 2017-2020 100 30 90 80 25 70 20 60 Rs. i. the Ports. Billion 50 15 40 30 10 20 5 10 2017 2018 2019 2020 2017 2018 2019 2020 Ongoing Annual New Ongoing Annual New Comparatively. The 2020. there will be increasing projects that are directly implemented by the investments in the new projects in sectors such State Owned Enterprises (SOEs) in five main as human resource development.331 18.380 9.3 Development Projects Implemented the government budget. the overall importance in creating investor-friendly Government is considering new financing options environment and linking rural and urban including the public-private partnerships (PPPs) commercial centers in the country.881 Total 205.970 9. access to quality and inclusive education while laying the foundation for the creation of educated In view of the above.571 31.600 Aviation* New 6.038 37.100  35. Billion Rs.744 83.018 Power and Energy* New 70. it should Hence.4).252 203. Aviation. Table 7. the Government by State Owned Enterprises (SOEs): Off strives to create a conducive environment to Budget attract more Foreign Direct Investment to the country.988 181.967 36.650 33. development to other sectors. The off budgetary project pipeline could The PIP provides an account of the development be considered for possible funding under PPPs.380 6.467 106. industry and sectors. but the loan repayment commitments are with Treasury Source: Public Investment Programme 2017-2020.100 10. some key policy reforms 115 . SRI LANKA | ANNUAL REPORT 2016 Chart 7. As such.3 | Human Resource Development Chart 7. Mn 2017 Projections 2017-2020 Sector Type Budget 2018 2019 2020 Cumulative Ports* New 9. the Government is expecting to meet be also noted that the need for infrastructure remaining 82 percent of the total investment development cannot be ignored considering its requirement from the private sector.253 50. Department of National Planning 7.531 billion which amounts allocating more resources from infrastructure to 18 percent of total investment requirement.518 11.873 238. Sanitation and Power and Energy (Table 7. to encourage more private sector participation in the development process to reduce the burden on 7. However. Water Supply and trade and agriculture during the period 2017.685 213.e.097 76. 54.995 22.431 Sanitation** New 33.264 50.400 .901 On going 34. 3.4 | Off Budget Project Portfolio 2017-2020 Rs.450 25.687 804.381 Water Supply & On going 52.

The higher education sector aims at enhancing the emerging and re-emerging diseases such as quality and relevance of the university education dengue. Accordingly. MINISTRY OF FINANCE. leprosy and tuberculosis to produce professionally competent and will constitute a significant portion of the public capable graduates. enrolment in state universities while promoting the engagement of non-state institutions in higher education with proper regulation and In addition. At vocational training which would be facilitated the same time with regard to Information and by the policy reforms to introduce 13 years of Communication Technology. encouragement of creation of necessary infrastructure facilities for university research and forging of links between the public to engage in sports activities paving industry and the universities are promoted the way for a healthy nation while encouraging through specific measures. In order to ensure the school students to take part in sports. comprehensive industrial exposure for trainees especially under public-private partnerships. Chronic Kidney Disease due to unknown etiology (CKDu). HIV. beautician services and related is also directed towards reducing prevailing products. Both the mechanism available for teacher training in preventive and curative measures with regard order to ensure the quality of education delivered. Further. to non-communicable diseases. national drug policy. vocational education or to direct are to be adopted to cover the areas of health employment. quality of higher education. In addition. Investment for cosmetics. rabies. necessary reforms education. elderly an education inspectorate are proposed to be care and establishment of a regulatory authority established as key policy reforms. course curricula will be regularly enabled service industries and increased use of revised and measures will be taken to provide electronic transactions and digital services. quality and relevance of application of knowledge and technologies. the Government is compulsory education and thereby the creation committed to the policy of offering “ICT4ALL” of effective synergies between general and with an acceptable quality of service and vocational education. sports sector will focus on the supervision. budgetary provisions will be disparities by ensuring availability of required increased to develop rural/primary healthcare human resources and physical resources for the institutions. In order to ensure that affordability in any part of the country leading skills education is answerable to the demand to a digital economy. In order to enhance the education insurance. The policy initiative for Chapter 07 | Public Investment Programme 2017-2020 healthy nation by ensuring easy access. quality of health administrative procedures. regular revision and diversification to ensure the availability of equipment. school boards and care services delivery. Steps are taken to increase the investment in health. meet healthcare needs of the elderly. The digital economy would created by the diversification of local and foreign be characterized by new export-oriented ICT- labour markets. SRI LANKA | ANNUAL REPORT 2016 are currently being introduced to the school Investment in health emphasizes creating a education sector. address healthcare needs of the estate sector and Furthermore. students are directed to higher care services. The national labour policy focuses on protecting 116 . research and development of the country by building capacities and strengthening science and technology through the intensification of The investment in skills education would focus advancement and dissemination as well as the on improving access. education process and their constant upgrading. improving making 13 years of education mandatory is to quality and affordability of healthcare services be introduced with the vision to make “no child to the people while recognizing the importance is left behind” in the education frontier and of co-existence of different forms of medicine to ensure that after the completion of school and participation of private sector in health education. patient’s safety. drugs of curriculum will be made while strengthening and devices across hospitals in the country. a performance-based financing model will be introduced to obtain the The Government expects the enhancement of maximum out of the public investment.

The export of certain livestock products such particularly in production. Priority investments in several steps including enhancing the coverage of the agriculture sector will be channelled to crop Employees Provident Fund (EPF) beneficiaries. In major initiatives which have been identified in order to improve labour productivity and better the crop agriculture sector to be implemented working conditions. introduced. regulatory matters. it is expected to will be taken to establish mega zones for export. the Government will take over the medium term. restructure of regional plantation companies to enhance the competitiveness and make available better The investment in agriculture expects to achieve facilities for plantation community.5 Agriculture sugar production and value addition. plantation taking measures to ensure migrant worker safety. is predominantly engaged in agriculture. as chicken. the introduction of high yielding promoting entrepreneurship for quality and varieties and technologies with research and high paid jobs in the country. the twin objectives of ensuring food security by substituting possible imports and promoting Investment in livestock sector will be focused the export of agriculture and agro-based on achieving the policy objectives of increasing products through increased competitiveness production and quality of livestock products to in the international market. create a virtuous and responsible society that explore new niche markets. coconut and 7. Low interest credit facilities will make Public Private Partnerships will be encouraged popularized so as to encourage entrepreneurs by providing land and necessary infrastructure to invest in value addition and development of facilities by the Government. promote re-export enables freedom to engage in artistic work. By recognizing involvement in the sector is mainly limited to the the necessity of promoting milk production. the fisheries sector will be developed The National Food Production Programme with specific initiatives to promote deep sea which aims at making self-sufficiency in food fishing and regulate coastal fishing through crops.MINISTRY OF FINANCE. provision of infrastructure. Agriculture Modernization Project that improvements in harbours. the Government will take necessary steps to research and development and management of improve the gene pool in the cattle industry. agribusiness ensuring optimum occupational safety and development. The private sector satisfy local demand and to boost rural income. Therefore. processed meat and egg will also branding and value addition. the advisory and extension in the sector will particularly be implemented services will be further strengthened and so as to facilitate and augment the private modern technological interventions will also be sector investments in agriculture development. in particular. new policy initiatives In addition. Measures Through these endeavours. encourage private sector entrepreneurship in rubber. milk based products. Furthermore. of tea with an added value. The Government be encouraged simultaneously. sector will be modernized to increase its competitiveness and dynamism with the objective The public investment in culture and heritage of capturing a considerable market share in the sector will be focused on conservation of natural international market while ensuring the decent heritage and promotion of cultural activities. affiliated facilities encourages private investment. The skilled and development and the establishment of large- professional migration will be encouraged and scale agro-enterprises for value addition and the labour migration will be diversified while product diversification. marketing. In view of increasing fish production. living of the plantation community. input supply to ensure the quality of products The importation of new breeds of cattle and and service delivery and safeguard the small buffalo will serve for this purpose. production and improvement. Establishment and upgrading fishing vessels and the infusion 117 . SRI LANKA | ANNUAL REPORT 2016 the rights of the domestic and migrant workers of Agricultural Mega Zones and Strengthening and achieving healthy industrial relations while of Value Chain Development are some of the Chapter 07 | Public Investment Programme 2017-2020 enforcing existing laws and regulations. scale producers.

A competitive high value added export promotion The industry sector aims at supporting private strategy will also be adopted to encourage export sector development especially in export-oriented product specialization. be promoted providing financial and technical supports targeting export and domestic market Trade and investment policy is directed towards demand. technology transfers and Chapter 07 | Public Investment Programme 2017-2020 joint venture programmes in the areas of harbor the special lending window for the SMEs will be centered business development. as success commercial entities.7 Infrastructure upgrading the existing industrial zones. Trade. The public investment in the and preparation of a cohesive marketing strategy industry sector will be mainly focused on the to attract tourists from key tourist generating and establishment of industry and technology mega potential markets. The Government plans to establish proper connectivity and increased access to basic economic corridors with the aim of unlocking amenities and for attracting foreign investment. Investment and trade with the objective of simplifying Tourism administration and registration process. The internationally accepted principles of supply chain management will be developed to upgrade Investment in infrastructure will set the stage for the industries. speeding up land regularization Investment in trade and investment focuses on and acquisition processes with the exclusion the formulation of a comprehensive trade and of legal and institutional barriers are some investment policy. The for tourism gaining recognition as a hub for development of the industry sector is decided nature. zones with infrastructure facilities and services on par with the international standards and 7. absorption of technology. industries with emphasis on the diversification of products and geographical location and more The tourism sector will aim at transforming effective industrial harmony. Furthermore. the Government will put in to attract high spending tourists with a longer place a strategic roadmap aiming at improving stay in the country. attention will and reforming investment climate for industrial be paid to the diversification of tourism products development. SRI LANKA | ANNUAL REPORT 2016 of new innovations for fish harvesting. The Government intends to ensure connectivity 118 . improved trade facilitation Distribution of land allotments for the landless and economic integration through Free Trade people. The private sector Establishment of fishery mega zones in will be encouraged to invest in industries while selected areas is one such intervention going creating an environment to attract more Foreign to be undertaken jointly with the private sector Direct Investment facilitating Public Private investment. promotion of production of initiatives in the land development sector. Private the unrealized industrial potential of defined sector participation will be encouraged to initiate locations. In addition. the establishment of a state land Agreements (FTAs) and regional co-operations information system for effective utilization of will be promoted to enhance market opportunities. historical and adventure-based by the investment made to the sector and by tourism. giving due consideration to the increased welfare. To this end. tourism development innovation. high value added Sri Lanka as the World’s most treasured island and productivity driven industrialization. The ornamental fishery will also Partnership (PPP). recreational provided while steps will be taken to uplift SOEs fishing and aquaculture development. Accordingly. cultural. MINISTRY OF FINANCE. The production of fingerlings for inland ensuring high trade performances and increased fishery will be promoted through research and global integration by creating business-friendly development and private sector participation is regulatory and operational environment while encouraged for commercial production. land resource. Accordingly.6 Industry. proper mega zones will be established while improving regulations and legislation amendments as infrastructure facilities in attractive destinations well. high-tech export products and the establishment of agencies for development and international 7.

The Government will make the required in urban and suburban areas will be a priority investment to meet the increasing industrial of the Government. will be promoted through the establishment of improved sanitation facilities will be developed multi-modal transport centers with park and in rural and estate sectors while establishing ride facilities.MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 and efficient mobility of goods and passengers through renewable sources in line with the through a properly designed road network and “sustainable clean green energy concept”. The energy sector policy is to ensure energy social equity and harmony. constructing Urban development of the country focuses on new rail tracks connecting Kurunegala and establishing large urban cities to facilitate the Habarana via Dambulla and introduction of new improvement of investment climate to attract modes of transport such as Bus Rapid Transits business. aerodromes will be improved covering the key naval. buses and rail compartments to the service. while giving special attention to mix and technological innovations. Electrification of the existing railway system between Veyangoda and Panadura. Therefore. the reliability of strategic cities out of which development of supplies. The Chapter 07 | Public Investment Programme 2017-2020 reduce the cost of transport to make Sri Lankan private sector will be encouraged to undertake products competitive in the global market. air. (WRMPP) has already been launched intending to ensure economic growth and prosperity. In Authority will be established. Land transport aims at meeting the present the strategies in this sector will be mainly focused and future demand for the transportation of on increasing access to pipe borne water supply passengers and goods ensuring quality. Twelve and energy mix considering economic cost. equitable access to safe drinking water and sanitation to the entire population. the Government is committed to increasing the electricity generation 119 . conversion of Western Region. for the development of ports and airports for improving domestic and international Megapolis development will be facilitated by connectivity and promoting Sri Lanka as a tourist the adoption of the Western Megapolis Act in destination and a logistic hub. transport and supply services taking tourist destinations while a number of open sky the advantage of geographical positioning of agreements will be entered into countries with the country. ensuring safe drinking water for areas affected by the modernization of railway and bus transport CKDu. Therefore. industries. the domestic airport network and water be developed as a center of providing financial. More facilities for passengers will piped sewerage/waste water and septage be provided with the deployment of modern disposal systems in densely populated cities. cities have been identified to be developed as environmental impacts. independence. with widest possible mode estate areas. safety facilities in un-served urban areas and rural and and affordability. The region will parallel. Western Region Megapolis Plan emerging economies. by creating an efficient road network covering all levels of road administration while ensuring The Government is fully committed to providing safety and equity. Port infrastructure due course under which a Western Development and port-based industries will be developed. Furthermore. In this context. Intermodal connectivity and commercial water demand. Foreign Direct Investment (BRT) and Light Rail Transits (LRT) have been through sustainable city development and identified for development. both small scale energy generation projects and Investment in road sector is directed towards in large scale and solar power electricity generation facilitating the economic growth of the country projects. convenience to consumers and strategic Kandy and Galle have been initiated. environmental security by diversification of energy resources sustainability and individual happiness. the main economic hub of Sri Lanka into an environmentally sustainable and economically dynamic Ports and aviation sectors recognize the need Megapolis.

environment for private sector to invest in avoidance of overlapping and duplications. Natural forests and forest Management of river basins and catchment plantations will be conserved while ensuring protections are given due consideration to peaceful co-existence among wildlife and ensure the sustainability of water resources and humans. simplification of systems. maintain the quality of ground water resources. Intensive environmental quality and safety by mitigating methods of cultivation. public service delivery will be re-oriented plays a vital role in creating a conducive through transform management methodologies. and transportation.9 Environmental Management while paying attention to spatial variation in Environmental management intends to ensure water availability in the country. property and reducing water usage. Government time. free and progressive foreign policy empower them by implementing specific welfare will be followed forging close ties of cooperation programmes to contribute to the development with all countries while protecting the country’s of the country.10 Social Protection identities. Investment in irrigation the economy to facilitate a robust economic and water resources development sector would growth leading to sustainable development. and non-aligned. to move towards the common goal of socio- economic development while securing the social harmony between multi-ethnic and multi-cultural 7. MINISTRY OF FINANCE. increased use of technology. housing for affordable groups. At the same vulnerable groups. 7. Ensuring good governance will lead towards In addition. The small environmentally sustainable vehicle usage tank improvement will also be undertaken. of disaster mitigation and disaster risk reduction concept to the national development agenda will Sri Lanka’s diversity will be used as a platform be a priority of the Government. Although subsidy and welfare sovereignty and territorial integrity. a reserve fund will be established increased reliance and trust on public service for reconstruction of infrastructure in disaster delivery systems and will be a critical factor in affected areas. In addition.8 Good Governance A multi-hazard early warning system will be established along with a comprehensive centralized database for damage and loss data. Harmonization ensuring the wellbeing of the people. while establishing insurance increasing investor confidence for attracting schemes for economically important sectors foreign investment to the country and ultimately through proper fiscal measures. availability to water users by providing water in adequate quantities with improved management. SRI LANKA | ANNUAL REPORT 2016 The housing sector emphasizes affordable access New technologies in the management of court Chapter 07 | Public Investment Programme 2017-2020 to decent housing facilities for every family and proceedings and developing professional thereby raising the quality of life of all citizens by standards to ensure efficient operation of the addressing mainly the housing needs of targeted legal system will be introduced. A mainly the vulnerable and the disadvantaged. focus on the construction of new multipurpose Environmental pollution and damage will be irrigation schemes and trans-basin diversions to controlled through encouraging green energy minimize spatial variations of water availability production and usage and encouragement of and enhance water retention capacity. capacity building at all levels and introduction of an outcome based performance The irrigation sector aims at ensuring water evaluation system. Ongoing reconciliation efforts will be The Government intends to improve the living strengthened in order to ensure the rights of each condition of certain segments of the country. citizen enabling one to feel as a Sri Lankan. enhanced productivity and water use efficiency 7. programmes and livelihood assistance schemes 120 . crop diversification and climate change impacts and thereby reducing improved irrigation techniques are being used for potential disaster risks on people.

000 Reduce volume of runoff water (MCM) 28.983 850. Billion) 295.000 live births) 34.000 Youth unemployment rate (%) 20. SRI LANKA | ANNUAL REPORT 2016 Table 7.000 live births) 8.5 Tourism income (USD Billion) 2.7** 100 Environment Forest cover (%) 29.3* 565.33 80 Eligibility for University Entrance from G.E (O/L) (%) 69.E.Targets 2020 Chapter 07 | Public Investment Programme 2017-2020 Indicator 2015 2020 Human Resource Development Survival Rates (Grade 1-11) (%) 86 100 Qualified for G. Department of National Planning 121 .1 Digital Literacy (%) 25* 40 IT/BPO export revenue (USD Million) 910* 5.92 10 Infrastructure Share of railway passenger transport (%) 5 10 Total container traffic (TEUs ‘000) 5. Rubber and Coconut (Rs.5 1 spices and other export crops (USD Billion) Export earnings of Tea.) 25.1 17 Tourist arrivals (No.500 Safe drinking water coverage (%) 86 100 Sanitation coverage (%) 86. vegetables.79 4.2 1.0 Premature deaths due to NCDs (<65 years) (%) 18 9 Agriculture Export revenue from selected agricultural exports such as fruits.000 21.7 14.C.5 | Public Investment Programme .MINISTRY OF FINANCE.000 New admissions to Skills Education (No. Trade.7 32 Social Protection Female labour force participation rate (%) 36 40 Preschool enrolment (%) 95 100 *Data pertaining to 2014 **Exclusively for the HHs Source: Public Investment Programme 2017-2020.2 6.C.5 Self-sufficiency in liquid milk (%) 44 100 Industry.2 25 Infant mortality rate (per 1.8 Share of electricity generation from non-conventional renewable energy sources (%) 11 20 Total irrigable extent (Hectares) 744.35 80 New admission to state universities (No. Investment and Tourism Employment in industry sector (No. 0. Million) 1.5 30 Export earnings (USD Billion) 11. cut flower and foliage.000 Maternal mortality rate (per 100.) 182. (A/L) (%) 62. (A/L) subject streams from G.C. Million) 2 3 Industry contribution to GDP (%) 28.0 6.676 50.E.5 Export earnings of fish and fishery products (USD Billion) 0.829* 350.

SRI LANKA | ANNUAL REPORT 2016 have been implemented over the years. development. gender- development mega zones and Megapolis in based violence and women headed households. It is projected that elder population will fisheries covering 25 districts will enhance the be doubled from the current level in 2041. Western Province.2 percent industry and technology.2 percent in 2001 and 12.6 percent for key sectors such as economic development. the Government’s policy directs to recognized. tourism. To agriculture and economic productivity. areas are the priority intervention areas of the children of the country should be nurtured and Government. proposed 45 Mega Zones ageing population has increased from 6. capacity of eldercare services will be increased. Improving inter-regional be directed to address challenges identified with connectivity. The importance of sustainable protected removing any impediment that halters utilization and conservation of natural resources their physical and mental growth such as child available at the regional level for achieving malnutrition and violence against children. In long-term regional development targets is also this context. In addition to these grass and international migration trends. economic development process through economic low political representation by women. while raising their quality through enforcement The implementation of relevant sectoral policies of service standards and guidelines. Therefore. Therefore. studies abled at the school level. friendly environment in the country. mortality Cluster Village System”. the different sectors and regions. linking regions to the national regard to low female labour force participation. income meet the increasing need for eldercare services generation activities and connectivity among and to support our seniors to age gracefully. Decentralized Capital Budget Programme and Sri Lanka’s ageing population is growing as “2500 Grama Rajjaya Sanwardana Kendra under a consequence of changing fertility.11 Regional Development characterized by entry and exit mechanisms to prevent the inclusion and exclusion errors to the Regional development identifies the need for welfare programmes. in 2012. Similarly. higher education and have shown that existing welfare programs are vocation level will be strengthened ensuring Chapter 07 | Public Investment Programme 2017-2020 poorly targeted. Rural Infrastructure Development Programme. removing regional disparities The Government strives to promote gender by paying special attention to lagging areas equality and women’s empowerment with key and poverty pockets and strengthening disaster measures such as ensuring 25 percent women’s risk reduction measures in disaster vulnerable representation in local authorities. introduce an integrated welfare and subsidy management and social security system 7. MINISTRY OF FINANCE. Empowerment of women is a key priority of the uniqueness and diverse nature of resources in Government and investment in this regard will respective regions. Sri Lanka’s root level initiatives. The ‘National Plan of Action for Sri the Government has already implemented Lanka’ is currently being implemented focusing community development programmes such as on the elimination of violence against children. in 1981 to 9. Healthcare and strategies in the PIP enables the realization of facilities will be made more affordable to the five development goals and creation of investor- elders. income status and thereby to improve the living Existing mechanisms to educate the differently standards of the people as envisaged. ensure children rights in a safe environment free from violence to provide opportunities for their In order to transform these policies into action. 122 . enhancing the living standard of communities to a decent level by identifying potentials. it is necessary to their growth as individuals. agriculture. all relevant parties are encouraged to ensure The Government will ensure that the differently the timely and effective implementation of the abled are not marginalized and that their identified policies and strategies to reach a high- contribution is obtained in development efforts.

MINISTRY OF FINANCE. SRI LANKA | ANNUAL REPORT 2016 Chapter 08 | Financing of the Budget Financing of the Budget 08 123 .

574 billion .780. Billion 80 Total 6. MINISTRY OF FINANCE.1. multilateral and The draft Appropriation bill submitted to commercial arrangements.188 billion in 2015. Such expenditure-revenue gap Total Rupee Loan Treasury Bond Treasury Bill SLDB/OBU CBSL Advances Other was filled with financing from domestic and foreign sources within the borrowing limits approved by Parliament for the fiscal year.780.000 Sources : Department of Treasury Operations and Central Bank of Sri Lanka 2.000 1. Foreign Financing Syndicated Term Loan of Rs.519 billion in 2016 is a projected to shrink along the envisaged path of 13 percent decrease compared to that of Rs.519. requirements for financing billion in 2015.1. For instance.000 Foreign 558.699.2016 8.236 8.370 519. foreign financing is projected to decrease from 67 Table 8. Bond of Rs.744.000 Rs. 16 of sizable portion of foreign deficit financing. would ease over the medium term.000 70 3.000 Financing 4.1 | Composition of Government Debt Gross 1. 2015. the actual total borrowing was Rs.249 7.254 billion.000 574. Foreign funded on- the Parliament relates to year 2016 budget going development projects received substantial determined the borrowing limit as Rs.945 billion while foreign sources marked a notable share of domestic financing.000 556.1.2 Government Borrowing Programme – Deficit financing in 2016 mostly utilized foreign 2016 sources comprising bilateral. moving away from the billion.745 fiscal consolidation. 2015 2016 Item Approved Approved Usage Usage Limit Limit Chart 8. 1.000 Domestic 1.1 | Government Borrowing Limits and Usage percent of total financing in 2016 to 15 percent of Rs.000 60 The actual total domestic borrowing of Rs. while the proceeds of the Parliament of Sri Lanka was granted for from international debt issuances also made up a this limit under the Appropriation Act No.180.1. the domestic financing strategy focused primarily on shifting the liability towards Out of the above borrowing limit of Rs. Mn total financing in 2020.000 1. 218 billion issued at the foreign market. The medium-term strategy for deficit financing Project and Program loans of Rs. tilts towards domestic sources. 8.222.699 financing during the year meeting a part of the billion for financing the resource gap.000 945.945 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 billion in 2016 is a 20 percent decrease over that of Foreign Debt Domestic Debt Total Debt as a % of GDP Rs.000 1.102 billion and Development Policy.1.154 1. SRI LANKA | ANNUAL REPORT 2016 Chart 8. amounting to Rs.188.000 1.519 near-term debt creating financing instruments.524 1.Borrowings from while the reliance on short-term instruments foreign sources were comprised the Sovereign such as bank borrowings lessened markedly. As billion which contributed from domestic sources such.2 | Domestic Debt to GDP Ratio: 2009 .000 1.1 Overview 55 50 45 40 35 % of GDP Development orientation of the national 30 25 20 budget 2016 demanded more resources for Chapter 08 | Financing of the Budget 15 10 meeting expenditure requirements over the 5 level of government revenue mobilized in 2009 2010 2011 2012 2013 2014 2015 2016 the country. treasury bonds issuances of longer tenure amounting to Rs. Mainly this decrease was due to settlement of a part of Bank Overdrafts 124 .000 1. As fiscal deficit is Total borrowing of Rs.744.000 90 9. Meanwhile.699 the medium to longer end.485 % of GDP 5. Approval deficit financing requirements.519.485 Borrowing 10.524 1.000 1.699.

3 107.7 248.3 0.3 Domestic Financing During the year. The total net borrowing amount mainly consisted settlement of part of to finance the deficit in 2016 through marketable provisional advance amounted to Rs.6 -48.5 -32.7 -17.4 0.3 Other -22.8 -4.7 Sources : Department of Treasury Operations and Central Bank of Sri Lanka *Excluding investment by non residents 125 .0 -5. Compared to the net outflow of Rs.4 98. while there was a repayment of non-marketable debt of Rs.3 0.3 Other -22.7 248.67.8 43.9 49.4 98. borrowings from Treasury bills Chapter 08 | Financing of the Budget reflected a net inflow of Rs.7 140.1 -7. In 2016.5 -4.6 Provisional Advances from the Central Bank 7.4 Non Bank Sector 300. contribution to the Table 8.5 132.5 billion since the 8.4 billion in 2015 Total net borrowings from domestic sources to resulting an increase in NDF by 39.MINISTRY OF FINANCE.5 -3.0 100.5 -79.2 -27.3 -11.1 Net Domestic Financing (NDF) issuances exceeded the repayments.3.3 Treasury Bonds* 442.0 13.7 248.There was a repayment of Rs. compared to Rs.6 349.4 billion in 2016 to Rs.5 50. 79.6 By Marketability 592.5 37.0 92.0 Sri Lanka Development Bonds 223.7 327.6 349.4 39.26.6 By Maturity 592.8 74.4 19.0 Treasury Bonds* 442.0 Provisional Advances from the Central Bank 7.5 Non . 248 billion.0 -120. 328 billion to the Central Bank of Sri Lanka.8 74.4 39.1 229.4 100. Bn) As a % of Total Item 2015 2016 2015 2016 By Type 592.5 -4.0 -120.2 -67.5 -4.2 -27.0 Treasury Bills* -26.7 140.3 183. 8.8 139.2 | Net Domestic Financing of the Government Budget: 2015 and 2016 Amount (Rs.0 100.0 Banks 291.6 349.8 1.6 percent in finance the budget deficit decreased by 58 percent 2016.8 132.0 -120.6 -43.1 35.0 100.0 100.Marketable -46.8 102.5 -3.0 Sri Lanka Development Bonds 223. 79.5 73.8 107.8 74